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Local banks strong in lagging economy

By Jared Felkins
The Times-Journal

Published September 30, 2008

As dismal news of sour mortgages from large banks and an overall credit crisis on Wall Street emerge, local banks are reporting strong assets and a financial expert advises to stay strong and go long on investments.

Talk of Congress’ creation of a $700 billion bailout for Wall Street and national reports of Wachovia and Washington Mutual being bought in recent days have many on edge as to what could happen to their money.

But three local bank presidents say their customers’ money is federally insured and safe.

“To my knowledge, all of the banks in our area are healthy,” said First Federal Bank president Steve Eberhart, who is also the chairman of the Community Bank Association of Alabama. “The real issues have stemmed from lending practices that have been going on for a number of years. There was a lot of high-risk or sub-prime lending going on. In a lot of cases, more was leant on the property than the actual value.
“For the most part, banks in our area don’t deal in that type. The real issues we are dealing with on a national level are our larger banks.”
Eberhart said First Federal Bank is in good shape to weather the economic storm.

“We’ve recently gone through federal examination in the last two months,” Eberhart said. “We have capital levels well above regulatory limits and our balance sheets are clean. We don’t have any foreclosed property right now and any delinquencies we have are well within normal perimeters.”

First State Bank president David Henderson agreed.

“Right now, money in community and home-owned banks is as strong as ever,” Henderson said. “I think everyone’s money is fine. Our bank especially, we had the opportunity to get into financing mortgages at 100 percent or 110 percent. Our board said it wasn’t a wise choice. We just didn’t want to get into that and stuck to the traditional style of banking.

“All those banks that did that made more money. They got so consumed with growth, they lost focus. There’s more to it than being the biggest. You want to be the best.”

Fort Payne Regions president Scott Bateman said Regions Bank recently bought five branches of Integrity Bank in Atlanta. At the time of Regions’ merger with AmSouth Bank, it was the eighth largest bank in the nation.

“Regions Bank made a profit during the second quarter,” Bateman said. “Regions Bank is strong and is here to make loans. We had prepared for this even before some of the other banks. Of our mortgages on our books, less than 1 percent are sub-prime mortgages.”

Edward Jones financial advisor John T. Davis said choosing long-term investments for retirement plans.

“Markets don’t like uncertainty, and that’s what we are seeing right now,” Davis said. “Stick with quality investments, diversify and invest for the long term. If it’s a 401 (k) make sure it is balanced. For a person that is retiring in two years, his or her portfolio will look different from a person who is retiring in 20 years.”

On Tuesday, the Dow Jones Industrial Average showed a big rally from being down 777 points on Monday. At the close of trading Tuesday, the Dow rose nearly 490 points.

Davis said the bear market – or a 20-percent or more decline in the market – should ease over time.

“Looking back over time, these bear markets do occur,” Davis said. “Every time there has a bear market, there has been a recovery. We feel very confident this time there will be a recovery.

“If you have long-term goals, you should have long-term investments. Worry about what you can control.”

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