Banking On It

by Steve May

While the breadth and depth of the financial industry’s down cycle is hard to predict, there is ample evidence Acadiana bankers will emerge bruised — not battered. News remains very encouraging about the health of Acadiana banks. Think about it. It’s important to you, even if you’re not an investor in one. Healthy local banks are a critical, fundamental element in the Lafayette economy’s ability to function properly. Knowing your deposits are safe and sound and your banks’ lending policies aren’t locked down in a siege mentality are re-assuring thoughts whether you’re a consumer or business customer. Access to capital is everything to our economy here.

What’s the word? So far so good, at least at this first quarter milepost. IberiaBank, MidSouth Bank, Teche Federal, and Home Bank all continue to exhibit clear ongoing signs of vitality as Lafayette and its surrounding areas navigate through unknown waters and times. While loan volume has certainly been falling, there are some clear reasons for the decline: Go Zone incentives have expired, oil and gas is in a down cycle, and commercial real estate-driven projects are disappearing. In other words, lower loan volume is not because of restrictive bank lending policies. What’s important to note here is the stable performance of area loan portfolios. While it’s hardly surprising loan delinquencies are ticking up, collectively our area banks are experiencing nothing remotely like the avalanche of bad debt write-offs and late payments seen around most of the U.S. This is encouraging not only for the apparent reason of keeping credit lines open and strong, but because our healthy local banks become magnets for deposits, both from local and out-of-state customers. Why here? Ask where is your money safest? A bank in Miami? L.A.? Phoenix? How about in a money market account on the isle of Antigua? I know a guy who was promising some pretty nice returns on CDs over there. Depositors looking for safety and soundness have suddenly become aware of our own little island respite, Acadiana. And their deposits are steadily inflowing here, as HomeBank CFO Joe Zanco was quick to point out.

Meanwhile, IberiaBank’s Daryl Byrd and MidSouth Bank’s Rusty Cloutier continue to draw sweet headlines and comment from national news sources and financial commentators: Byrd for his decision to return federal “healthy bank“ TARP funds (as noted in a recent CBS Evening News report) and Cloutier for his high-profile appearance before congressional committee hearings on TARP and its impact on America’s small banks.

Bill Fenstermaker, IberiaBank’s chairman, noted with obvious pride in the prime time story that Iberia is the first institution in the U.S. to return every penny it received from the federal program. Cloutier was also interviewed and shadowed for days by a Sunday New York Times Magazine reporter researching the piece. The story, reportedly a lengthy one, is due out in early May. As Cloutier says about Lafayette area businesses, “Heading into the ’80s recession most Acadiana businesses were highly leveraged with debt; this time they’re loaded with good cash balances.”

Byrd also recalls those dark days: “Interestingly, our experiences in the ’80s in South Louisiana taught us valuable lessons about managing a company for the long haul,” he says. “An important lesson learned is ‘not to have too much of anything,’ because concentrations in one industry or another can come back to haunt you. Our company is very balanced between our consumer and commercial portfolios, and we are very balanced within those segments.”

Some of us learn and retain our lessons.

Without a doubt the retained institutional knowledge of local lending elders, with painful memories of the traumatic, Great Depression-like ’80s, has factored heavily into prudent lending policy here — even as it appeared just months ago, with oil at $100 and gas around double digits, that the only direction our economy could go was permanently up. Likewise, other bankers, affirming Cloutier’s point, have been quick to say much credit (so to speak) is due to smart, informed, local businessmen and women for their restraint in avoiding the temptation of becoming caught up in the nation’s over-extended credit nightmare. “Anytime we have seen people reach for short-term gains or get greedy, the situation always has a way of unwinding badly,” Byrd says. “We’ve tried really hard to plant our feet solidly on the ground and have often been willing to take less profit in the short term to gain long-term stability.”

Here’s the short version: Acadiana is only now entering its first phase of a downturn as it reacts to external economic forces beyond its control. The breadth and depth of this cycle is hard to predict. But with a combination of wise preparation over the past several quarters and ongoing future prudence, Lafayette area banks and their customers have, at least for now, the wind at their backs. As one of the giant redwoods of Acadiana banking told me, “South Louisiana was among the last to enter the national downturn; with a little luck, we may be among the first to exit.”