Michael Quinn bought his first house in 1988, “the year the stock market took a nose dive.” But Rhinebeck Savings Bank”™s president and CEO didn”™t buy the home as an investment: “I bought it to live in, which is what most Americans do.”
It”™s an old-fashioned way of looking at housing and mortgages that has held sway regionally and that, in the wake of the national subprime mess, is proving both prescient and prosperous.
The easy money that flowed into hands of risky borrowers on a national level is now dust in the wind. Which begs the question, How are local banks faring?
Hudson Valley”™s small commercial and residential banks have conducted business the way they always did, despite the lure of easy money.
“You just don”™t take money that belongs to your customers and lend it to someone on a hunch they”™ll pay you back,” said a chorus of bank chiefs across the region. And that philosophy, said Quinn, is what helped keep the region more stable than other parts of the country. “We stuck to our tried-and-true methods. We may have lost some customers, but we are still here doing business and are solid.
“If anything good”™s come from this terrible recession,” he said, “it”™s that Americans have learned that having everything immediately is not necessarily a good thing. We”™d become an ”˜I have to have that now”™ society, and look where it”™s gotten us. Hopefully, we are going to get back to basics as a result.”
Quinn”™s bank, and most others in the Hudson Valley, did not take TARP (Troubled Asset Relief Program) funding, so returning the money to the federal government isn”™t a problem. Right now, said Quinn and fellow CEOs, helping customers get through the financial crisis ”“ whether they are commercial or residential customers ”“ is the No. 1 focus.
“I can”™t stress enough how important it is for customers to go to their lenders the minute they start to see financial difficulty,” Quinn said. “Some wait until they are over their heads. Some problems are solvable; others are not. But I know most of my peers agree: Contact your bank immediately. The longer you wait, the more it will hurt and the possibility of helping turn it around becomes more and more remote.”
For people who have watched 401(k)s dwindle, “there are delinquencies in all portfolios, which goes hand in hand in a recession,” said Quinn. “For our part, we have not had a foreclosure for 15 years; this year, we”™ve had three. While that in itself is not monumental, we are paying close attention to what”™s happening. It is especially disturbing to see those who have had good credit histories and good jobs become unemployed and are now at risk. We are doing our best to help them.”
The upshot of the downturn, according to Quinn: “We are seeing a return to the old ways ”“ people saving for things they want. People buying homes to live in, not as investments. So, if your home is not worth what they said it was a year ago, the market will come back. The key is to remember you bought it to live in, not as an investment.”
Quinn is not as optimistic as the economists, many of whom have said things will begin to turn for the better in the third quarter of this year. “I think it will be later than that ”“ next year, or even 2011. Again, I don”™t want to sound pessimistic, but I think it will be some time before there is a balance between supply and demand again.”
Quinn”™s fellow bank executives also weighed in:
Marge Rovereto, president and CEO
Ulster Savings Bank
Headquarters: Kingston
“We are optimistic about the future of community banking in the Hudson Valley. During challenging times, sound decision making, innovative product solutions and excellent customer service provide opportunities for even greater growth for banks that care about their customers.
“One of the most important ways we can help our customers in today”™s challenging economic environment is to provide payment relief. Right now, we are offering programs that allow a customer to refinance up to 105 percent of the value of their home. This is important in light of declining property values resulting from a slower housing market. With today”™s low interest rates and government incentives, it”™s an excellent time to reevaluate your home financing.Â
“Today”™s current market also presents unique opportunities for homebuyers. More properties for sale mean lower prices and more choices for those looking to purchase a new home. With today”™s low rates, it”™s a great time to consider a home purchase.
“Providing customers with affordable mortgage and refinance options in only a part of Ulster Savings Bank”™s commitment to our community. We offer Smart Money workshops and ”˜Teach Children to Save”™ programs, reaching more than 3,000 students this year alone. Our branch offices have student art openings, professional artist openings and nonprofit events continually.”
Eric Wiggins, president and CEO
Greater Hudson Bank
Headquarters: Bardonia
“While the economic crisis has affected us all, it has also created opportunities for a community-oriented bank like Greater Hudson Bank. We have been experiencing a return by businesses and consumers back to local banking. Resurgence in a back-to-basics approach is taking hold and as a result Greater Hudson has seen significant growth in deposits as customers have sought out safe, secure locally based institutions to hold their savings. A great deal of this transition is a result of the security of knowing that traditional banking products offer increased FDIC insurance as opposed to stocks or other noninsured investment alternatives.
“At Greater Hudson, banking at its simplest is knowing who you are as a bank and offering competitively priced deposit products while providing credit to qualified borrowers in the communities you serve. Knowing your customers, understanding their ability to pay, judging character and understanding the value of collateral are all aspects of how we look to grant credit. We are relationship oriented, provide quick decision making, sensible terms and structured financing that make sense for the borrower and the bank. All of the deposit dollars that our customers entrust to us go back in to providing credit and loans to our neighbors and fellow local businesses.Â
“With our strong capital position, coupled with the FDIC”™s enhanced deposit insurance coverage, we provide a local customer-oriented institution where our clients can feel safe and secure banking with us.”Â
Gerald Klein, president and CEO
Mahopac National Bank
Headquarters: Brewster
“The last 18 months have certainly been challenging times for our economy and for our industry. Many of the larger financial institutions experienced significant loan losses during that timeframe, which ultimately lead to the credit crisis. Mahopac National Bank did not engage in subprime lending, and while we did experience an increase in past-due loans as a result of the economic downturn, we continued to make new loans to qualified borrowers to fill the void left by the larger banks. In fact, we experienced record commercial loan originations and loan growth in our portfolio in 2008. Conversely, in the first quarter of 2009, we have seen a slowdown in new commercial loan volume; however, residential refinancing activity has increased substantially as long term rates were near record lows in the first quarter.
“As we continue to navigate our way through this challenging economy, we are working with those of our borrowers who are experiencing difficulties in an effort to find mutually agreeable solutions that give them an opportunity to stabilize their situation. Every customer is different, and the key is for the borrower to maintain an open dialogue with their account officer.
“During the last several months, we have heard from an increasing number of our customers that they believe that the economic decline has bottomed out, and they have seen renewed sales activity. A level of optimism exists for economic stimulus funds to reach our area, and we need to be prepared to work with our customers to take advantage of these opportunities as they develop. We continue to focus on our core business, which is generating new deposits so we can lend those funds to qualified borrowers in the communities we serve to keep our economy moving forward.
“Finally, as the investment community has also experienced a period of instability and uncertainty, this presents an opportunity for a stable institution such as Tompkins Financial (parent of Mahopac National Bank), with more than a century of experience in the trust and investment business, to expand. We recently hired two new wealth-management professionals, and we are finalizing lease negations to establish a new location in White Plains.”        Â
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Yitty Gutner, senior vice president
Key Bank, Hudson Valley Region
Headquarters: Orangeburg
?“For banks, client focus is more important than ever. The banks that will come out of this recession the strongest are those that will do so by creating ways to deepen relationships with clients, understanding their goals and challenges, providing them with ideas and working closely with them to achieve financial security. ?“First and foremost, consumers want reassurance their bank is strong and healthy. In addition to the basic products and services, many individuals and businesses are looking for guidance and expertise from their banks. They want help in understanding the new federal rules and regulations, such as changes to SBA lending programs and to FDIC insurance coverage for deposits. In essence, in order for bankers to address clients”™ needs and concerns, they will have to take on more of an advisory role. ?“I also expect that banks will continue careful lending practices. Despite what you hear, many banks are lending now and will continue to lend to companies that meet prudent underwriting criteria. Some banks, like Key, have always had conservative underwriting; others are now following that lead. ?“Lastly, with the economic slowdown, banks are experiencing even more aggressive competition for clients. In order to grow market share, successful banks will develop and implement strong, differentiating marketing strategies, offer attractive rates and/or incentives and emphasize customer service. At the end of the day, it is ultimately savvy consumers and businesses that will benefit from these strategies.”
David Cocks, president and CEO
Walden Savings Bank
Headquarters: Montgomery
“I am thankful Walden Savings Bank does business in the Hudson Valley.Our area has held up well in so many categories compared to others parts of the country; it brings some level of consolation in these tough financial times. We have not seen the drastic drop in home values, the massive unemployment and large numbers of foreclosures that many states have. Of course, that does not mask the fact that banks all around the valley still have their challenges.
“Today”™s circumstances dictate loan delinquencies will be higher and the time my employees spend working with our borrowers to keep them in their homes or keeping their small businesses viable has taken on a new meaning. We are all in this together and we will try to come up with solutions that make sense for both the bank and the customer. Hopefully, together we will all come out of this stronger and smarter.
“To that point, law makers and regulators also need to be smarter than before. Good, conservative, safe and sound banks should be insulted when unregulated lenders are able to break the rules, take their ill-gotten gains and then leave town. We are then painted with the same broad brush as ”˜those bad banks”™ that caused the problems; that is simply not the case. We need common sense regulation in the future for all institutions to ensure this never happens again.
“People should also understand that, the remaining healthy banks will be paying the price for the misconduct exhibited by those institutions that did not operate intelligently and are now closed. The current FDIC premiums being charged to recapitalize the insurance system will impact the many banks”™ bottom lines at just the wrong time. Although we are still forecasting a very profitable 2009, it could have been much, much better. Let”™s hope that better financial times for all are right around the corner.”      Â
Dave MacFarland, president and CEO
Riverside Bank
Headquarters: Poughkeepsie
“These are tough times for the banking industry and the local economy even here in the beautiful Hudson Valley. By far, the economy is the worst that I have seen in my 46 years here in the local banking industry. I hope that I am wrong, but I do not believe that we have hit the bottom yet. We still need to address credit card issues, indirect auto loans and automobile leasing issues.Â
“My major concern is for our local municipalities that received a great deal of their income from mortgage recording taxes, property taxes and sales taxes. Many of these tax revenues have been substantially reduced and will have a major effect on our local governments. As chairman of the board of Pattern for Progress, we are taking steps to help local municipalities weather this crisis. Yes, difficult times face us.
“In spite of this tough economy, I do believe there are great opportunities out there, especially for the local community banks here in the region. Most, if not all, of our community banks were not involved in the subprime mortgage debacle or risky investment products the large money-center banks or Wall Street Banks participated in. Our deposits come from local businesses and individuals; all of our loans are made to businesses and individuals right here in our bank”™s local trade area.
“As a small community bank, we know our customers and can work with them during these difficult times. We have money to lend to our local business customers and look forward to an economic recovery. Our slogan, ”˜Business Banking the way it should be,”™ speaks for itself.”
