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Idaho banks fare better than many

Rick Thomas | Hagadone News Network | UPDATED 14 years, 6 months AGO
by Rick Thomas
| July 11, 2010 9:00 PM

COEUR d'ALENE - One phrase sums up the feeling of more than one banker in North Idaho.

"Cautiously optimistic," were the identical feelings of Max Faller, president and chief executive officer of bankcda, and Dave Bobbitt, chairman and CEO of Community 1st Bank in Post Falls.

"It's still not a red-hot market," Bobbitt said. "We're doing well compared to everybody else."

Idaho banks and credit unions are better off than in many other states, a report from Gavin Gee, director of the Idaho Department of Finance, said on Friday.

Idaho-based banks and thrifts, on average, outperformed banks and thrifts nationwide with higher levels of core capital (12.03 percent vs. 8.57 percent), a stronger net interest margin (4.02 percent vs. 3.83 percent), and lower net charge-offs (1.81 percent vs. 2.84 percent) as a percentage of loans.

"While Idaho has not been immune to the economic downturn, we are encouraged by new highs in the number of securities filings and registrations," the report said. "We also see early signs of stability in the number of mortgage companies and mortgage professionals licensed by the department. Idaho remains an attractive market for many financial services firms."

"We expect to report modest earnings mid-year," Faller said. He anticipates "low six-figure" profits, an improvement over 2009 which resulted in "upper six-figure" losses.

Assets of the independent community bank grew from $16.3 million after its first 10 months in business to average assets of $90.7 million when it noted its ninth anniversary in May.

"I think 2009 for Idaho banks was a difficult year," Faller said.

Bobbitt agreed.

"We are still not where banks traditionally have been," he said Friday, after attending a Western Independent Bankers board meeting in San Francisco.

But Community 1st, which opened three years ago, avoided the pitfalls that hit so many other banks by not being in the midst of the rush to finance mortgages that might have later gone bad.

"We avoided the worst of it," Bobbitt said. "If we had been in operation prior ... real estate was what everybody needed. That is where the action was."

Community 1st "has done well in the last nine months. We turned the corner."

He credits the luck of good timing, starting up when capital was easy to raise, bringing in $10.5 million in investments in "two weeks and two days" to start the bank.

"It wasn't planned," he said. "We had a guardian angel on our shoulder."

Community 1st now has a good capitalization ratio and liquidity, Bobbitt said.

And there was encouraging news from California, with reports that the real estate market has likely bottomed out. Homes that once were priced at $700,000 had declined to around half that, but are rebounding, he said.

Idaho-based financial institutions continue to deal with the impact of the recession, the state report said. Idaho-headquartered commercial banks continue to experience increased amounts of non-current loans and loan charge-offs, an increase in foreclosed real estate properties, and, as a group, negative earnings for the quarter. Currently, six of the 35 banks with branch offices in Idaho are the subject of formal regulatory corrective actions.

Faller said bankcda sold off some badly performing loans, cutting its losses. He expects 2010 to "continue to be a challenge, but there are signs of improvement.

"We are continuing to work through some problem loans," he said. "But deposit growth is good, positive. We identified carefully our loan portfolio, assessed every one. We have a good understanding of the risks."

Gee pointed out that the department and/or federal regulators continue to work closely with all Idaho banks and credit unions to improve their overall financial condition. Because they are critical to the economies of Idaho communities, everyone has a stake in Idaho's financial institutions remaining strong.

Finally, Gee reminded Idahoans that, "there is no safer place to put your money than in an insured account at a bank, thrift or credit union. In the unlikely event that a bank in Idaho should fail, all Idaho bank deposits are insured up to $250,000 and no depositor has ever lost a penny in an FDIC insured deposit."

Pointing out an encouraging sign, the department reported record income for fiscal year 2010, booking more than $11 million in revenues from regulated industry members seeking or doing business with Idaho residents. Pursuant to the law governing the department's dedicated fund, about $6.2 million will be transferred to the state's General Fund once the revenue numbers are finalized.

For fiscal year 2010, the department reported total business filings, licenses and registrations of 135,528 and record highs for financial services sales agents.

Larger banks continue to face cutbacks. On Wednesday Wells Fargo reported it will close its 638 Wells Fargo Financial operations across the U.S., including one in Coeur d'Alene and three in Spokane.

The closure is part of a restructuring since Wells Fargo merged with Wachovia in 2008.

The "worst recession since the Great Depression was stressful on all banks," Faller said. "Prudent banking philosophy has been beneficial to bankcda. The impact was not too serious. We are very pleased about that."

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