Local banks doing better than big ones
TEXT OF STORY
Tess Vigeland:
Wall Street may be a smoking ruin, hosed down with gallons of cash from the Treasury Department. But elsewhere in the financial world, all they’ve needed is an eye dropper, if that. Local bank managers in places like Shreveport, Louisiana, say there’s plenty of money to be had. And customers don’t have to pay the kind of rates that the big banks are charging. Kate Archer Kent of Red River Radio paid a visit to one local branch.
Kate Archer Kent:
Harold Turner is president of Red River Bank, which has 14 branches in Louisiana. Lately, he’s been getting stopped on the street by people asking: “Hey Harold, are you still lending?”
Harold Turner: Yeah, we have money to loan. And we’re going to loan money like we have been. We’re going to do it with people that we feel comfortable with that can pay it back that will sign on the note.
One person he feels comfortable with — Debi Camus. She’s a commercial real estate broker who recently borrowed $1 million to refurbish a building in downtown Shreveport. She shopped around for a competitive interest rate and found an existing relationship gave her the best deal.
Debi Camus: I can go walk across the street and sit down in front of Harold face-to-face. So not only was he comfortable with our financial statements, but he’s comfortable with us personally.
Camus had two things going for her: her relationship with Turner and her excellent credit rating. Turner says those are the cornerstones of the local banking business and the key to those banks’ state of health.
Turner: What we’re trying to do is meat and potatoes. It’s pretty much basic banking based on principles that have been proven for a long, long time. Where some of the larger banks, their business model requires them to do things that is somewhat nontraditional.
He’s talking about those credit swaps and derivative contracts you might have read about. Community banks like his steered away from that swamp of exotic securities. Now, unlike the big banks, they don’t need to swallow the Treasury’s $250 billion bailout. And, they’re still lending at reasonable rates.
Turner: The market is not going to allow us to be abusive on interest rates. If you think I’m charging you too much, talk to another bank. They’ll loan you the money.
Turner is quite serious. Here in Shreveport, competition for customer deposits is intense. It’s the same in small towns and cities right across the country. Ken Cyree is a banking professor at the University of Mississippi. He says community banks were wise to stick to servicing local businesses rather than go after big corporations that borrowed vast sums of money and are now running into trouble.
Ken Cyree: It’s the really large customers who are having problems borrowing like General Electric or General Motors, and small community banks don’t have the capital by regulation and also from prudence to be able to lend to these very large businesses.
That strategy may have restricted their growth in the past, but Cyree says local lenders are smiling now. Deposits at community banks nationwide are rising. People have sold out of stocks and money market funds and they’re socking away their savings close to home. The upper levels of the financial system may look threatened, but Main Street banks are getting stronger. Good news for them and for the local businesses they lend to.
In Shreveport, I’m Kate Archer Kent for Marketplace.
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