News:Growth slows for national, local banking industry

Banking in Southeast Missouri is holding steady but figures show that its hold may be a bit precarious.

In March, the Southeast Missourian reported that banks in the area "bucked at least one national trend during 2007," pointing out that 14 of 16 banks in Cape Girardeau, Perry, Scott and Bollinger counties reported increased profits, despite a more dismal national picture. According to the Missourian article, overall profits nationwide fell more than 80 percent and only half the banks in the country showed increased profits.

Despite the profits local banks recorded, there are signs that losses may be hovering on the economic horizon, according to the Missourian report. Half the community banks in the area increased their losses provisions, the article reads, an accounting charge against profits to offset expected loan defaults. The Uniform Bank Performance Reports, which the Missourian uses to track local banks, show that some area borrowers are having trouble paying their loans. Ten of the 16 banks the Missourian tracked reported an increase in credit losses, including seven that reported credit losses had grown by 100 percent or more since 2006. Another 10 of the 16 banks reported an increase in loan or lease payments that are not current and may be potential losses in 2008.

Eagle Bank and Trust Co., based in Jefferson County, and Alliance Bank of Cape Girardeau both reported a net loss of $1.6 million for 2007.

Since March, banks on a national level have tightened their requirements for lending standards, said Dr. Bruce Domazlicky, director of the Center for Business and Economic Research at Southeast Missouri State University.

"Clearly we're going through a tough stretch right now," Domazlicky said. "I don't know if it's a recession or slow growth."

Domazlicky added that the growth rate for the last quarter of 2007 was reported at. 6 percent, but was recently revised during the first quarter of 2008 to show. 9 percent growth.

Growth will most likely continue to be slow through the second quarter of 2008 Domazlicky said, but may pick up to a 1 or 2 percent growth average annual rate by the end of the year.

As the economy tries to recover, job growth also slows, Domazlicky said. So far, that has not yet seriously affected the area.

"The labor market tends to lag behind the economy," he said. "We don't have a big change in employment. When businesses are not sure what's going on they're reluctant to lay off workers, especially their better workers. If the economy continues to slow down, we'll find people laid off and zero or even negative job growth. It's pretty tough, especially for people trying to find a job in the next six to eight months."

One bright spot on the local economy, he noted, is the addition of a new bank branch in Cape Girardeau. Illinois-based Banterra Bank has opened a branch on North Kingshighway in Cape Girardeau, claiming that market research showed it to be a good location for a new bank.

"It's a good sign," Domazlicky said. "Some people are optimistic about the future and feel they can make a profit. It's a vote of confidence for the economy long term."

Southeast Missouri has seen a rise in foreclosures during 2007, but has not suffered the mortgage problems of subprime loans and other non-standard borrowing practices to the extent that other areas are reporting. However, demand for new homes has subsided, according to the Missourian report, forcing builders who took out construction loans to sell their surplus to pay back those loans.

"The banking industry has had a tough time, specially with subprime loans, and they're a little more cautious," Domazlicky said. "Banks are now trying to rebuild their capital. As they do, that strengthens the bank and in general banking will recover. It will take a little time."