The Sky’s Not Falling
Conservative Lending Leaves Local Banks in Good Shape, Reports Say


Reports published in various communities in Montana and Wyoming indicate that local banks have not fallen victim to the financial crisis that recently has plagued Wall Street’s large invest-ment banks.

“Montana's bankers are not directly tied to Wall Street and as a result, we haven't felt the devastating impacts of the current economic crisis like many other areas of the country,” Laurel banker Jay Harris told the Billings Outlook recently.
Harris is president of Yellowstone Bank, which has branches in Laurel, Billings, Columbus, Absar-okee and Bozeman. He said Montana banks practice conservative lending and are better capitalized than  east and west coast banks. 

In a statement released in Octo-ber, Montana’s banking commissioner, Annie Goodwin, said that Montana’s 64 state-chartered banks are safe and in good shape, “despite the challenges that many financial institutions are facing in this current difficult economic climate.”

Supporting that statement, the Montana Bankers Association 2nd quarter 2008 figures show that the state’s mortgage delinquencies, at  1.54 percent, were the third lowest in the country, the national average being 3.53 percent.
Harris went on to tell the Out-look that Montana banks continue to make real estate, business, and consumer loans (though credit can be restricted, see story, page 21). His comment about troubled banks describes the economic crisis in a nutshell: “The banks that have gotten into trouble,” he said, “were making risky loans—no down payments, interest only loans, and not following good banking practices.”

Real estate values have also not suffered the way they have in other areas of the country, although in areas like Bozeman an excess supply of houses creates downward pressure on home prices.

Similar reports, though perhaps less emphatic, have come from Western Montana. The Ravalli Republic recently reported that home prices in that area are not “tumbling,” banks are lending, unem-ployment is lower than the national average, and income levels have not dramatically dropped.
Larry Swanson of the University of Montana’s O’Connor Center for the Rocky Mountain West said Montana is doing far better than several state economies where things have gone badly.

“I am amazed at the amount of anxiety out there,” Swanson told the Republic. “People are taking what they see occurring on the national level and projecting it into their own area.”
“We’re a full year and a quarter behind the nation,” he went on to say. “This construction downturn is certainly hitting other areas harder first and it’s hitting a handful of states the hardest. California, Florida, Arizona have seen the worst of it.”

Swanson said Montanans can choose to “project the worst on their own situation or understand that the worst is hitting somewhere else.”

Wyoming’s Cody Enterprise also reported that local banks, so far, at least, are not being seriously effected by the broader financial crisis. Pinnacle Bank President Doug Weedin told the Enterprise that most community banks in Wyoming, Montana, Idaho, North Dakota and South Dakota are doing just fine. “Thing's are actually quite good.” he said.
Because community banks cater to local communities, Weedin said, they are more likely to remain strong than the troubled financial institutions in certain big cities.

Rich Petersen, president of Shoshone First Bank, which became Wells Fargo in October, said the problems big Wall Street banks are going through has had “absolutely no affect whatsoever” on his bank.

 “Shoshone First Bank never got into the problems that are pervasive in the industry, and Wells Fargo didn't either,” he added.

“We're doing quite well,” says Ken Stockwell, president of Big Horn Federal Savings Bank. “We didn't issue any subprime loans, and we haven't had a foreclosure in many years.”

“As an industry,” Stockwell added, “it's going to affect us all in some way. Just how much has yet to be seen.”

But he went on to say that due to conservative lending practiced by local banks, and because most community banks steered clear of the subprime mess, the negative fall out should be minimal.








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