• WisBusiness

Lund: Community banks 'doing fine'

By Brian E. Clark
For WisBusiness.com

By some measures, all banks in Wisconsin struggled in 2008 as the recession took hold of the economy.

But Badger State community banks – which generally have assets of less than $1 billion and make up 96 percent of Wisconsin’s banks – finished the year with a 33 percent increase in net loans and leases.

“That is very positive, and it shows that we were making loans and had a very nice jump,” said Daryll Lund, president and CEO of Community Bankers of Wisconsin. An agriculture economist by training, Lund has worked for his association for 13 years.

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On the downside, he said the state’s smaller banks ended 2008 with $350 million in net income, a decline of about 27 percent from 2007. Still, that was much better than Wisconsin’s larger banks, which saw their net income tumble by 149 percent, he said.

As for the first two months of this year, Lund said talks with members of his association leads him to believe community banks are “doing fine” and are hoping for the traditional springtime surge in mortgages.

Lund said community banks have done better than their larger cousins because they tend to be more conservative “and because we know our customers ... so if the local community is doing well, then the bank is doing well because the vast majority of our loans are made right in the communities where we are located.

“We take local deposits and make them into local loans,” said Lund, 46. “So knowing our customers is why we are successful.

“And no, we did not get into subprime lending or exotic investments and purchases. Yes, we are conservative by nature, but knowing our communities and customers is our major strength.”

Lund said he was unfamiliar with the specifics of association member Anchor Bank’s economic difficulties.

Anchor Bancorp Wisconsin owes US Bank more than $116 million. But US Bank agreed recently to delay Anchor's $56.3 million payment, due March 2, to May 29, when the entire $116.3 million will be due.

“They are having some challenges that are unique and are not the same as what other community banks are experiencing,” he said.

Lund also defended criticism by builders that banks are unfairly choosing not to renew their loans.

“Banks are heavily regulated and we are caught in a situation where regulators are ... putting much more scrutiny on our loans and underwriting at the same time as you have people in Congress saying ‘make more loans,’” he said.

But Lund said if a potential home buyer has a job and can make a downpayment, that buyer should be able to get a mortgage.

“Absolutely, the mortgage business continues and when the rates were down after the first of the year, we saw an uptick of refinancing and new purchases,” he said.

“A lot of people took advantage. What we like to say is that community banks are open for business and making loans right now.”

Lund said community banks haven't tightened their lending rules.

“Most Wisconsin community banks have been consistent in their underwriting practices over the years and did not change to try to keep up with subprime and non-regulated lenders,” he said.

He said an association study for 2008 showed the state’s roughly 270 community banks accounted for only 5 percent of foreclosures in Wisconsin.

“That tells me that the best way to prevent a foreclosure is to make a good loan from the beginning,” he said., noting that community banks didn't offer 0 percent-down loans.

Lund said he and association members are angry that they have been tarred by the same broad brush that stems from multi-billion losses by huge banks and investment firms.

“I’d say we are upset about that,” he said. “Clearly there is a difference between Main Street community banks and Wall Street investment and commercial banks.

“When we see the ‘too-big-to-fail’ institutions continue to have their challenges, the media paints all banks in the same picture and that is not the case.

Looking into his crystal ball, Lund said he hopes to see a turnaround in the economy by year's end.

“I’m hoping Wisconsin can weather this out and see increases in employment levels, loan demand, ag lending, plus home prices stabilizing and going up by 2010,” he said.

In the meantime, he said he hopes Wisconsin politicians don't raise taxes “to get us out of this hole.

“Now is not the time to impose new taxes and new burdens, particularly on the business community,” he said. “We need to be stimulating growth and generating jobs. I hope that will be the focus.”

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