Bank optimism: 'Next year will be a good year'

Local institutions steady during financial turmoil

Despite turbulence at the national level, local financial institutions are solid.

That's the message Flathead Valley banks and credit unions are telling customers, echoing a statement issued earlier this week by Montana's commissioner of banking and financial institutions.

"Montana banks are doing well, despite the challenges that many financial institutions are facing in this current difficult economic climate," Commissioner Annie M. Goodman said Tuesday.

Financial institutions in the state are somewhat insulated from the national economy's extreme fluctuations, said Jeremy Presta, Park Side Federal Credit Union's president and chief executive officer.

"The nice thing is in Montana, we're not immune to what's going on in the rest of the country. However, we're kind of insulated to a certain extent," he said.

"When things are booming all over the country, all over the world, we're pretty steady. But when things are bad all over the country, all over the world, we're pretty steady."

The industry has slowed a little, said Don Bennett, president of Freedom Bank in Columbia Falls.

"Most people have put everything on hold. They're waiting to see what's going to happen," he said. "It's caused a slowdown, but other than that, I think things are going OK."

That's especially true compared with other markets across the country, Bennett said. In places such as Arizona, California and Florida, where financial institutions engaged in riskier lending practices, banks and credit unions are in much worse shape than in Northwest Montana.

"They're really feeling the crunch," he said. "They're much more overinflated pricewise on real estate and had a lot looser lending guidelines than we've had here."

Flathead financial institutions "have pretty much stuck to the basics of financing," he said. "We're meat-and-potato kind of lenders. We don't get involved in fancy derivatives or subprime loans and that kind of stuff."

The credit market is tighter than it was a few years ago, in large part because of the loose lending guidelines Flathead bankers tried to avoid. But local banks and credit unions do have money to lend.

"The ability to get loans has definitely tightened up," Presta said. "Lenders are definitely tightening up their underwriting.

"Whether we're actually seeing that here in the valley, I can't say. We're still lending money out."

So are Glacier Bancorp's banks, according to Mick Blodnick, president and chief executive officer.

"There's no doubt that it's far different than it would have been in 2005 or 2006," he said. "For a lot of individuals, credit was readily, readily available. Those standards have definitely tightened up, but for good, quality borrowers, there are multiple options.

"You keep hearing that credit markets have absolutely seized up, but I just don't see it around here."

Glacier Bank, the company's Flathead Valley presence, has exceeded corporate expectations in deposits and loans this year, Blodnick said.

Whitefish Credit Union also is doing well, according to manager Charles Abell.

"From our standpoint, while other institutions have tightened up, our loan demands have been strong," he said.

Whitefish Credit Union's delinquencies are lower than usual, though Abell expects those numbers to be closer to average this winter. Park Side Federal Credit Union's delinquencies and loan losses have increased slightly, but it's "nothing to get too concerned about or worried about," Presta said.

For the most part, customers haven't seemed very panicked.

The Emergency Economic Stabilization Act of 2008, which Congress passed last week, temporarily raises the basic limit on federal deposit insurance coverage from $100,000 to $250,000 per depositor. Under this legislation, the basic deposit insurance will return to $100,000 on Dec. 31, 2009.

Raising the limit has helped put some customers' minds at ease, Blodnick said.

"I really think that FDIC's done a good job of getting the message out that no one who's had insured deposits at a financial institution ever lost a single penny of their money," he said.

Before Congress approved the bailout plan, more customers were depositing funds in more than one financial institution to stay within the $100,000 insured limit, Presta said.

"I can't say I blame them. It's their money," he said.

"We haven't had a huge drop in deposits. There hasn't been a mass exodus. I do think some people have redistributed it to make sure their funds are covered by the federal government."

Presta advises customers learn more about how to protect their deposits.

"The more you know, the better informed you are, the better decisions you'll make with your own money," he said.

He also encourages people not to panic, a sentiment Blodnick shares.

"A knee-jerk reaction pulling money out - I just don't believe that's the right thing to do," he said. "I think that any bank around the country would say the exact same thing."

Bennett emphasized the importance of optimism in rebuilding confidence in the banking industry and the economy.

"I know this is kind of a tumultuous time, but I actually feel pretty positive," he said. "I think we'll come out of this thing stronger than ever."

"I just think a lot of what's going on is negative hype," he added. "I think if people keep a positive attitude, that that's going to help bring us out of this sooner."

The local banking business may slump a little this winter, Blodnick said, but that's typical in the Flathead, regardless of the national situation.

"There is seasonality built into our markets that you maybe don't see in Arizona, Texas, Florida," he said. "Historically things have always slowed down, except maybe for the boom years of 2004, 2005, 2006. …

"I would expect that during the winter and early spring months, we're going to see a slowing trend probably more in line with what we have seen historically, excluding maybe the last three or four years."

Abell, who has 43 years of experience in the credit union business, made a similar prediction.

"Things may get a little tougher this winter," he said. "You always have foreclosures and delinquencies. … For anybody in the money-lending business, that's part of the deal."

The economy always is cyclical, he added.

"Business cycles have been part of the American economy since its inception," he said. "There have always been ups and downs, times when we overbilled.

"The average down time is always much shorter than the average up time."

The Flathead's insulation from the national market may help the area get back on track sooner than the rest of the country, Bennett said.

"I wouldn't be surprised to see us recovering in the spring," he said. "I think next year will be a good year."

He emphasized again the importance of having confidence in local banking institutions.

"I just don't have any hesitancy whatsoever: Put as much money as you want in any bank in the Flathead," Bennett said. "They're all real strong."

The Associated Press contributed to this story.

Reporter Kristi Albertson may be reached at 758-4438 or by e-mail at kalbertson@dailyinterlake.com.