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“There’s only a finite number of good customers in the Valley,” said Asian Bank of Arizona President Les Gin during a March 23 roundtable at the Phoenix Business Journal’s downtown office.
The Valley’s banking industry, like other sectors, has relied on real estate loans for economic growth — but that dependence comes with a price.
And in the past two years, it has been costly. Thousands of jobs have been eliminated, dozens of companies have gone out of business, and banks still are reeling from soured loans and write-offs tied to the battered real estate market.
Doug Hile,
“We need the economy to get better,” he said during the roundtable.
The two-hour conversation with local community bankers came just days after Federal Reserve Chairman Ben Bernanke told a national convention of their brethren in Phoenix that fear should not guide lending decisions.
In some cases it is a factor, but reality is playing a bigger role.
Gin said his community bank stopped lending to gas stations because of slower consumer demand and the real estate fallout. Many gas station owners relied on residential developments to spur businesses. Some of those projects are in limbo, while others have low occupancy rates.
Steve Curley, president of
Bernanke, speaking March 20 to hundreds at the Independent Community Bankers of America convention and Techworld at the
During his 20-minute address, Bernanke touched on numerous measures the Fed has enacted since the market collapsed last fall, including cutting the Fed rate nearly to zero, buying up to $300 billion in longer-term U.S. Treasury bills, and purchasing up to $1.5 trillion in debt and securities issued by mortgage finance agencies, up from $850 billion.
“We can’t have a vigorous recovery unless we restore financial stability,” Bernanke said.
He said the long-term outlook for community banks is positive, despite a tough 2008, when
In
Nevada-based Silver State Bank and First National Bank of Arizona, the largest private bank in the state, failed last year and were taken over by federal regulators because of their exposure to real estate loans. Their secured deposits were sold to National Bank of
Many other community banks in the Valley are facing a similar fate unless they can capitalize their operations and build stronger balance sheets.
According to bank analyst Bauer Financial Inc., 14 troubled banks are operating in
Five stars is the highest ranking, and only Commerce Bank of Arizona, Country Bank, Foothills Bank, Nordstrom FSB received that grade in the state.
Banks with two stars or fewer are considered troubled.
“Loan quality at community banks may decline further,” Bernanke said.