Reports, signs point to mixed performance for area banks

Community and regional banks doing business in Southeast Missouri bucked at least one national trend during 2007 as 14 of 16 of such banks operating in Cape Girardeau, Perry, Scott and Bollinger counties reported increased profits for the year.

As a whole, the U.S. banking industry had a bad year, according to a report from the Federal Deposit Insurance Corporation. Profits overall fell more than 80 percent, and only half the banks in the U.S. showed increased profits.

But underneath the profit picture, there are signs in the latest round of Uniform Bank Performance Reports that some borrowers are struggling to repay their loans.

Half the community banks in the area increased their loss provisions, an accounting charge against profits to offset expected loan defaults.

Ten of the 16 banks reported an increase in credit losses, including seven that reported credit losses had grown by 100 percent or more compared to 2006. And 10 banks out of the 16 -- not necessarily the same ones reporting increased credit losses during 2007 -- reported an increase in loan or lease payments that are not current and represent potential losses in 2008.

"Typically, that will lead to losses down the road," said Greg Allen, chairman and chief executive officer of First State Community Bank, a Farmington, Mo.,-based bank with two branches in Cape Girardeau as well as branches in Perryville, Mo., and Sikeston, Mo.

First State Community Bank, with $604.6 million in deposits as of June 30, 2007, joined in the increased profitability, but bucked the other trends by reporting a significant drop in its net credit losses, to $80,000, from $552,000 in 2006. The bank also decreased its accounting set-aside for losses by 46.93 percent and cut its portfolio of non-current loans and leases to $93,000 from $310,000 in 2006.

Loan demand at First State Community Bank has been "significantly off" for 15 months, Allen said.

The Southeast Missourian tracks the quarterly Uniform Bank Performance Reports for 16 local and regional banks that are among the 20 banks with branches in Cape Girardeau, Scott, Perry and Bollinger counties. The banks hold the bulk of area deposits and make their profits by lending in the local economy.

The reports give a snapshot of each bank's financial health on a quarterly basis, with the reports released last week covering the year ending Dec. 31.

The two area banks reporting lower profits are Eagle Bank and Trust Company, based in Jefferson County, which reported a 20 percent drop in profits, and Alliance Bank of Cape Girardeau, which reported a net loss of $1.6 million for the year.

Defaults, late payments and bigger anticipated losses are all evidence that the national economic slowdown is being felt by consumers and businesses in Southeast Missouri, said Dr. Bruce Domazlicky, director of the Center for Business and Economic Research at Southeast Missouri State University.

"These problems we have with some of the credit markets are just not going to work themselves out quickly," Domazlicky said.

While Southeast Missouri hasn't been hit as hard by the mortgage problems of subprime loans and other non-standard borrowing practices that led to massive defaults in some cities, foreclosures were up in the region during 2007. And a lower demand for homes, evidenced by fewer housing starts in 2007, means builders who took out construction loans are under pressure to sell their surplus to pay back banks, Allen said.

"The consumer is stressed a little," Allen said. "When the consumer is stressed, it leads to weaker sales in businesses and that is likely to cause higher delinquencies going forward."

For the complete numbers on the area banks, visit the Rude Awakenings blog at www.semissourian.com. And for the real number junkies, there are links in my blog postings you can use to see all the details on every bank.

• Bank merger: First State Community Bank completed a merger Friday with Progress Bank of Sullivan, Mo. First Community had a strong year and Progress had a good year as well.

Progress, with five branches compared to 27 for First State, reported a net profit of $200,000, down from $707,000 in 2006. But the bank cut credit losses to $264,000 from $871,000 the year before, cut its provision for loan and lease losses to zero and reduced its non-current loan and lease portfolio to $849,000 from $2.8 million in 2006.

The lowered exposure to defaults represents a turnaround for the bank from a few years ago, Allen said. But while the acquisition will keep him busy, he expects his managers in Cape Girardeau, Perryville and Sikeston to continue trying to expand their market share.

As of June 30, 2007, the bank held 2.78 percent of deposits in the area, making it 10th among the 20 banks doing business here.

• Marquette update: The pending foreclosure of the Marquette Tower and Marquette Centre stems from cash flow problems associated with too much empty space in the buildings, Prost Builders president Vaughn Prost said Friday.

While substantial amounts of the tower are under contract to the state government agencies until 2014, large amounts remain unused and no tenant has been found for the Marquette Centre since renovations were completed more than a year ago.

"The issue we have had is a fairly significant amount of empty space," Prost said. "That is the challenge we have."

Prost operates the building under a limited liability company called Marquette Office Building LLC. Great Southern Bank of Springfield, Mo., holds the construction note and has advertised that it will foreclose on March 20.

Prost has been trying to sell the buildings, renovated with taxpayer support in the form of tax credits, since October. Prost said he's negotiating with the bank, has potential buyers in talks and could be announcing major new tenants soon.

All of those possibilities could produce the money needed to stave off the foreclosure sale. "We just have to keep our fingers crossed," he said.

But, Prost added, it doesn't help his company's negotiating position to have the buildings financial woes in the headlines.

• Baseball academy moves: Talley Haines, who spent nine years pursuing a professional baseball career, has been teaching the game to others for the past three years at his Southeast Missouri Baseball Academy.

Now, he's moving the academy closer to the students by leasing a building at 826 Enterprise Drive through broker Tom Kelsey of Lorimont Place Ltd.

Haines, a relief pitcher who ended his minor league career with a 3.32 ERA, along with Todd Pennington, also a pitcher, and Zach Borowiak, an infielder, provide the instruction.

The move to Cape Girardeau is a good idea, Haines said, despite owning the property at 9727 U.S. 61 in Jackson

"We feel it is a better location," Haines said. "Most of the athletes come from the southern part of the area. We get a lot of kids from Poplar Bluff and Sikeston, and it is closer for the kids to come and it is a little easier for the parents to drop the kids off and go shopping."

While the new location is a little smaller, everything available at the Jackson location will be available in Cape Girardeau, Haines said.

The building needs a few upgrades to meet the latest codes and that work is underway, Haines said. The formal opening date has not been set, he said.

From the press release file:

• JCS/Tel-Link took over the Verizon Wireless portion of Advanced Business Systems operations in Cape Girardeau and Dexter, Mo. Two employees, Bertie Espey and Bill Greiner, will move from Advanced Business Systems to JCS, with Greiner working in Cape Girardeau and Espey in the old Advanced Business Systems office in Dexter, which will be used by JCS temporarily. The Dexter location will be JCS/Tel-Link's eighth office,
• The Small Business Administration announced that low-interest disaster loans are available to help businesses in Cape Girardeau, Perry, Scott and 11 other Missouri counties that endured problems associated with a drought from April 1 through Dec. 31. The eligibility is the result of being located in counties contiguous to Illinois counties included in a declared drought disaster. The loans, up to $1.5 million at 4 percent for up to 30 years. are available to farm-related and nonfarm-related businesses and small agricultural cooperatives that suffered financial losses as a result of the drought. For more information, contact the SBA Customer Service Center at 800-659-2955 or go to www.sba.gov.

Rudi Keller is the business editor for the Southeast Missourian. Contact him at rkeller@semissourian.com or call 335-6611, extension 126