With analysts looking from Wall Street to Washington for answers to the current economic malaise, Mahopac National Bank President and CEO Gerald J. Klein Jr. says it all boils down to job creation.
To that end there is cause for optimism, Klein said, pointing to recent announcements by companies such as IBM Corp. and the Linuo Solar Group Co. that they would be investing in facilities in the Hudson Valley with the promise of creating hundreds, if not thousands, of new jobs in construction and in high-end manufacturing.
“Employment is the key to everything,” Klein said. “It”™s the catalyst to get everything else going.”
For clients of Mahopac National Bank, which primarily works in commercial and residential mortgages, the persistently high unemployment and lack of spending by consumers have weighed heavily on businesses, which have in turn delayed growth plans.
Creating employment opportunities for Hudson Valley residents would likely result in an uptick in spending at local businesses that would in turn boost confidence among business owners. “That ultimately has a cascading effect,” Klein said.
But at the present, uncertainty about the tax structure and the country”™s overall economic outlook mean there is not a lack of capital among lenders, but instead a lack of demand for loans among businesses as owners are reluctant to expand.
“There”™s capital out there ”¦ demand is weak though,” Klein said. “It”™s really a demand problem rather than a credit problem. Let”™s be clear about that: many people are in a position where they can”™t refinance or they”™re overleveraged as a result of prices dropping.” Approximately two-thirds of the bank”™s customers are commercial clients, with the rest being individual consumers.
While most of the bank”™s commercial clients have not been directly affected by the European debt crisis, they have all clearly been impacted by the drop in confidence that has manifested itself throughout the U.S. economy, Klein said.
“I would say that there”™s concern, but a degree of optimism that we have hit rock bottom in the economy. We”™re moving forward, but very slowly. I would say they (business owners) feel that they”™re holding their own and we”™re probably going to have low-to-moderate growth for the next couple of years.”
Despite the weak demand for credit, the bank has managed to expand its loan portfolio over the first half of 2011, possibly at the expense of some of the country”™s name-brand banks, Klein said.
With many of the country”™s biggest lenders still reeling in the aftermath of the subprime mortgage crisis, community banks have become a safe-haven for new clients.
“I think we”™ve acquired a significant number of customers over the last couple of years who had been concerned. ”¦ They”™ve been driven to community banks because they know that we did not participate in subprime loans and things of that nature.”
With resources such as remote-deposit technology and Internet banking in its arsenal, Klein said that Mahopac National Bank offers customers technology similar to what national banks possess, in addition to providing clients with the personal touch that may be harder to find among the bigger corporate banks.
“Our commercial lending customers have access to the key decision-makers. Our people on the ground are our decision-makers.”
Looking forward, Klein said there are two ways of looking at the current economy. While concerns persist among business owners, low interest rates present themselves for the opportunistic buyer.
“With interest rates as low as they are, there is a lot of opportunity for borrowers and businesses to take advantage,” he said. “One has to be selective, but it is a good buying opportunity.”
