QA& Ron Haynie
SENIOR VICE PRESIDENT OF MORTGAGE FINANCE POLIC Y
INDEPENDENT COMMUNIT Y BANKERS OF AMERICA
U.S. economy improves
NEW YORK — The index of leading economic indicators (LEI) increased for the eighth month out of the past
nine, the Conference Board reported this past January.
The index — a comparison of economic conditions with
2004 — rose 0.1 percent this past December after jumping
1 percent in the previous month. The index was flat this
past July and last fell in March 2013. The index has an assigned value of 100 and reached 99.4 this past December.
“Despite month-to-month volatility in the final quarter of
2013, the U.S. LEI continues to point to gradually strengthening economic conditions through early 2014,” Conference Board economist Ataman Ozyildirim said.
The U.S. coincident index, which measures current business conditions, also rose this past December, climbing
0.2 percent to 108.1.
Consumer confidence edges higher
NEW YORK — Consumer confidence in the U.S. economy
climbed for the second consecutive month this past January, the Conference Board reported.
The index, which slipped between September and November 2013, rebounded this past December, rising from 72
to a revised 77.5. It rose to 80.7 this past January, the research firm said.
The index assigns the average 1985 level a base level
The percentage of respondents indicating jobs were
“plentiful,” rose slightly from 11. 9 percent to 12. 7 percent,
while those indicating jobs were difficult to get fell from
32. 9 percent to 32. 6 percent.
Regulators warn banks of debt
NEW YORK — Washington’s financial oversight agencies
are steering banks away from financing mergers that involve high amounts of debt, a senior regulator said this
The Office of the Comptroller of the Currency (OCC) and
the Federal Reserve warned banks this past year that
stricter guidelines would be applied to high-debt acquisitions and that banks could face repercussions for financing high-risk deals.
“As regulators, we certainly hope to change bad practices
and remove the extraordinary froth that’s experienced at
the peak of a credit cycle. If we can mitigate that, it reduces
the size of the valley to follow,” OCC senior deputy Martin
The Wall Street Journal also reported that several big
banks avoided getting involved in deals that might incur
Manufacturing shows sluggish growth
NEW YORK — U.S. manufacturing grew this past January
but cold weather contributed to the slowest rate of growth
in three months, Markit Economics reported.
Markit reported the flash purchasing managers index for
manufacturing dropped to 53. 7 this past January from 55 in
the previous month. January’s number was slightly higher
than the 2013 average of 53. 5. Numbers that are higher
than 50 indicate growth.
Markit wrote that this past January’s measure indicates
“solid underlying growth across the U.S. manufacturing
“Extreme weather” this past January contributed to the
“sharpest lengthening of suppliers’ delivery times since
August 2008,” Markit reported.
In the Past Month
BY KURT STEPHAN
have Community banks weathered the storm?
As the economy continues its recovery after several tough post-crash years, the nation’s community banks are in generally robust health and looking to grow their assets. Represented
by the national advocacy of the Independent Community Bankers of America (ICBA), these
smaller banks are looking ahead with optimism despite ongoing regulatory challenges, many
coming from the Dodd-Frank Wall Street Reform and Consumer Protection Act. We spoke with
ICBA’s Ron Haynie, senior vice president of mortgage finance policy, to find out about the current state of community banks and their relationship with the commercial mortgage industry.
How is the health and future outlook for community banks in the current
economic and regulatory climate?
General market conditions are actually very good. For most banks, the problems they had as
far as credit defaults are pretty much behind them. Obviously, a few are still struggling, but for
the most part, the industry is in very good shape financially. The economy is doing pretty well,
and that helps breed confidence and optimism and spurs economic activity.
How are regulations coming from Dodd-Frank, particularly the Volcker Rule,
affecting the community-bank world?
The headwind that the community banking industry is facing is with the implementation of all the
various regulations coming out of the Dodd-Frank act, and the Volcker Rule, which wasn’t really
supposed to apply to community banks. The regulators threw us a curve ball on that at the eleventh hour. We’re hoping that this is like a storm, and when the storm passes, things will be OK.
[The new regulations] will have an impact on credit. A lot of banks are going to be extremely
conservative initially. There will be retrenchment of credit in some markets. It’ll be interesting
to see how the next six months play out. There’s been talk and speculation that now that the
rules are out, credit will loosen. I don’t see that happening because the requirements aren’t
looser. These things will curtail lending, as opposed to encourage it.
What is the current relationship between community banks and the mortgage-
The relationship between community banks and the mortgage business is probably as good as
it’s been in a long time; community banks account for about 20 percent of national mortgage
originations. One of the key things that community banks bring to the market is that they tend
to make loans that are more customized and serve borrowers that wouldn’t be able to get a loan
that would be sold in the secondary market — maybe it’s a unique property, a rural property,
or a mixed-use property. It’s not a transactional-based lending model; it’s relationship-based.
Which lending niches in commercial real estate are best served by community
Community banks tend to do a higher percentage of loans for construction than the big national
lenders do, again because of that “local touch” — you work with your local builder who’s probably a bank customer, you might be providing them commercial lines of credit. Community banks
focus a lot of their attention on small businesses — many times it starts as a cash-out refinance
or a home-equity line of credit of a business owner’s home to help them get started. They also
work with funding inventories, helping with equipment purchases and things of that nature.
Unfortunately, the nature of that type of business and the risk it posed was part of the reason that during the last downturn, a lot of community banks suffered financially and some of
them failed due to over-concentrations of commercial real estate and development lending.
Regulators, prior to the bubble bursting, were very concerned about many community banks
and their concentration levels of commercial [real estate]. Before things crashed, community
banks were starting to watch how much they had on their books and trying to get those concentrations down, or at least manage them.
With community banks now more “gun-shy” about making these types of
loans, what will get them back in the commercial lending game?
It depends on the condition of the bank financially. Most banks at this point in the cycle are
doing pretty well and, quite honestly, are looking for assets. They’re sitting on a lot of deposits that they want to lend out. There are a lot of bankers looking for good loan opportunities.
They may be more conservative in their credit analysis and may require more owner equity
or stronger financials, but in the right markets and depending on the condition of the banks,
there’s healthy competition for commercial real estate lending. It comes down to the project
or the relationship that the borrower could bring to the bank.
Even in some markets that were hard hit, you’re seeing a rebound in new construction. They’re
building houses, and you need to have stores and office buildings for people to work in, so
things are starting to move. It’s been a long time since the economy really started to take off.
© 2014 United Press International. All rights reserved.
Kurt Stephan is an associate editor at Scotsman Guide. Reach him at (800) 297-6061 or firstname.lastname@example.org.