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Archive for Friday, September 26, 2008

Lawrence banks in better position to weather financial storm thanks to economy

September 26, 2008

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Lawrence area bank leaders say the Kansas economy has helped their institutions avoid the major financial struggles that other parts of the nation are having.

"Kansas is fortunate right now," said Ted Haggart, president and CEO of Lawrence-based Douglas County Bank, citing a strong agriculture, energy and aviation economy in the state, as well as conservative business and banking practices that are keeping banks in Kansas on higher ground. "That stands us in good stead in situations like this."

As credit stresses plague the country, locally-owned community banks in the area haven't stopped lending money, though it's on a conservative basis, said Haggart and Bill Grant, president and CEO of Tonganoxie-based First State Bank, which is typical.

"Ninety-nine percent of our lending is done in our communities, to people and businesses that we know," Grant said. "We're trying to make their lives better so that the community as a whole betters. That pays off when things turn down a little bit."

The nation's problems aren't stemming from responsible community-based commercial banks like theirs, the local bank presidents said, but instead from large financial institutions, many of which specialize in home loans.

"Some of them got rather carried away in making the very risky, subprime loans," Haggart said. "We follow sound banking practices, sound lending practices, very safe investment practices."

The high number of mortgage-backed securities at larger investment banks created an illiquid market, which is at the center of the nation's economic problems. Mortgage-backed securities aren't as common in community-based banks in the area.

While they said banks in Kansas likely won't need to sell many of their assets to the federal government, if a national bailout plan is adopted, Haggart and Grant said their institutions do feel ripple effects from the rocky financial situation.

"Anytime the economic system, the banking system, feels a liquidity pinch ... and people are uncertain about the future, it's going to hurt a local economy," said Haggart.

Haggart and Grant both said they feel some sort of a government bailout would help stabilize the market, but they also realize it will require patience and strong oversight.

"Things are going to work their way out," Grant said. "They always do."

Comments

Sigmund 6 years, 3 months ago

If you don't own Fannie and Freddie (or the myriad of derivatives thereof) on your books, you'll be fine. If you do, the taxpayers will bail your dumb ass out. Heads you win, tails we lose.

Steve Jacob 6 years, 3 months ago

I have seen enough CNBC over the last year watching CEO's saying all is well only to close up shop a week later.

Godot 6 years, 2 months ago

Columbian Bank & Trust was supposedly a sound, conservative Kansas bank. Then big loans to five commercial real estate projects went bad and it was gone, over night.

Sigmund 6 years, 2 months ago

scootterxlch (Anonymous) says: "ceo pay is best not limited to a number but a multiple of the rank and file like 10x. example <this is for conersation purposes only) if the line worker makes 15 p/h the mgmt makes 150p/hsomething like that ????? thoughts"I know workers that aren't worth $1.50/hour and I am sure Warren Buffett is worth 1000x what he has made for shareholderrs (a BRK.A share is $135,000/share, ONE share!). Hard and fast general rules rarely fit individual circumstances, it really is up to CEO's and workers to ask for what they think they are worth and to walk if they find someone else who will pay it. It is up to the BOD's and shareholders to hold CEO feet to the fire and not give away the store.

douglascounty 6 years, 2 months ago

I agree 100% Reality Check! I've been with KU Credit Union for many years now. It's nice to know that my money isn't padding the pockets of the Banking Investors, rather supporting other account holders like myself. Not for profit is by far the way to go, IMO.

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