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Banking sector growth slows

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TEXT OF INTERVIEW

Tess Vigeland: Having trouble borrowing money? The Federal Deposit Insurance Corporation says bank lending plunged almost three percent in the third quarter.
That’s the largest drop in more than 20 years. In addition, the FDIC said only three banks had opened in third quarter this year. the fewest since World War II. Which made us wonder, why would any bank want to take a chance at this particular moment in history?

So we called up Bill Hawkins. He’s president and CEO of California General Bank in Pasadena, Calif., which opened in March. Welcome.

Hawkins: Thank you. Good to be with you today.

Vigeland: You have a small community bank. Hasn’t it been hard to start a new bank in this particular environment?

Hawkins: It’s been extremely difficult to get this bank up and running. We started on this project about two years ago, almost two and a half years ago. And as we began to move into the approval and capital raise phase, the economic tsunami, if you will, hit. And regulators became much more cautious about reviewing applications and giving approvals and new charters. And of course, investors were extremely reluctant to invest in a new bank.

Vigeland: So what kept you from running the opposite direction?

Hawkins: We have a terrific market. We are located in southern California, not to far from the Rose Bowl in Pasadena. And it is a market that we believe is underserved, from a community bank standpoint. So the plan, the market and the organizers just made it all seem to make sense to us. And ultimately, to the regulators.

Vigeland: I guess I’m just surprised that anyone would want to go into this business right now. Is there something counterintuitive about this, where maybe it is actually a good time to go into banking?

Hawkins: It is a good time, if you’re behind the wave. Our bank opened after many of the problems began to occur in the market. And we’re local bankers, making local decisions for local businesses. We have no bad assets, we have plenty of capital and we’re a willing lender. So all we need to do is look for the right businesses to provide loans to.

Vigeland: How’s business going for you?

Hawkins: We’d always like to have more business. But business is going well. It’s slow and we’re being very careful and very selective in the credits that we take on.

Vigeland: You mean in who you are lending money to?

Hawkins: Yes. The types of businesses, how long they’ve been in business and whether the cash’s flowing.

Vigeland: You mentioned bank lending and it has been down across the board. What’s your perspective on why banks still aren’t lending?

Hawkins: First of all, regulators have put a great deal of emphasis on reviewing loans, quality of loans. So I think that lenders are somewhat reluctant to go into the market and make loans, for fear of perhaps regulatory criticism if it’s not a good decision.

The other thing is is that as you know, many banks are facing capital constraints and so they’re downsizing their balance sheets. And then essentially, what that means is that they’re taking loans off their books rather than putting them on.

Vigeland: Then from where you sit, what do you expect to happen in the banking section, in this country? Will it continue to grow slowly? Will we eventually get to the point where we’ll see fewer quarters, where there are, for example, only three banks opening?

Hawkins: It’s going to be a while before we get back to the point where, for example, in the state of California, one time, couple of years back, there was a bank opening every other week. I think it’ll be a long time before we get back to that, Tess.

Vigeland: Bill Hawkins is president and CEO of California General Bank in Pasadena, Calif. Thank you so much for your time and happy holidays to you.

Hawkins: Thank you so much and to you.

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