CNJ staff photo: Tony Bullocks Phyllis Salguero, of The Bank of Clovis, counts back cash to customer Mike Reyna of Clovis on Friday. According to local bankers Clovis’ economy remains sound despite turmoil in the financial markets.
By Sharna Johnson: CNJ staff writer
Local bankers and economic experts say the Clovis and Portales area is insulated in some ways from the instability gripping the nation’s financial markets and filling citizens with trepidation about the future.
Smaller towns such Clovis and Portales, for the most part, depend on small, local banks and the residents tend toward conservative purchases and lifestyles, according to area bankers.
As such, most residents tend to avoid risky markets, misuse of credit and shaky mortgages that are destabilizing many American’s right now.
Likewise, local bankers say their banks follow the same conservative practices and have been cautious about lending practices and have invested in the local community through their business as opposed to taking market risks with their capital.
And for the most part they agree; loans, credit, mortgages, jobs and business opportunities still exist, though in some cases the standards may change.
While the effects of the financial meltdown on Wall Street and economic strains can’t be entirely avoided and additional burdens such as high fuel costs and dropping grain prices will be felt even in the smallest U.S. towns, local experts say the area can weather the storm and maintain stability through its close relationship with Cannon Air Force Base, continued conservative financial practices and most importantly, they said, by resisting fear.
Local banks and credit unions
Marty Tressell, president and chief executive officer of High Plains Federal Credit Union in Clovis, said while there has been some impact from high fuel costs and a slowdown in the purchase of automobiles, it’s been business as usual at his financial institution.
Tressell said credit unions are member owned, a majority of consumer loans have collateral backing and they don’t invest capital in the markets.
That localized service has worked to shield the credit union and its members from the shakeup on Wall Street, he said.
“We’re not dealing in those realms that the big banks are. … We take in money from local people and we loan it to local people. That’s the way we do business —We are stewards of local people’s money ” he said.
Randy Harris, president of The Bank of Clovis said the Clovis area is steeped in traditional, conservative values and finances are no exception.
Like Tressell, Harris said the money they handle flows to and from the community.
“We are somewhat insulated from the high swings and from the lows, the fluctuations that take place on Wall Street. You have really strong banks that have strong, conservative management. Your local community banks provide service for main street, not Wall Street,” he said.
“Our customers that deposit money with us, that money is reinvested in this area.”
No local banks have reached for or received federal bailout money and none are on financial institution watch lists, Harris said.
And rumors that credit is unattainable simply aren’t true, he said.
Lending practices have always been conservative and cautious in the interest of preserving that relationship with the community, he said, explaining credit is still available on the same terms it always has been, with good credit and a significant down payment.
“We have not changed the way we do business at all. Good, quality credit is still available. When they talk about unavailability of credit, they’re talking about those borrowers that should not have gotten credit to begin with,” Harris said.
National media attention has caused fear, which Harris said is in many ways, unjustifiable.
That’s not to discount what is happening in the markets, he said, but hope is not lost. There is still security and stability, especially in community financial institutions, he said.
He said the large investment banks that are struggling right now operate under different regulations than small local banks.
But the crisis calls for a re-evaluation of the system that allowed those institutions to grow and get out of control, he said.
“The majority of the communities were allowing the large corporations and the large Wall Street (investment banks) to dictate government policy. When in fact the backbone of this country is small farms and ranches and small communities. That is truly the backbone of this country and it is not these mega giants,” he said.
David Stone, president of Portales National Bank, said the success of his bank is a direct reflection of the success of its customers.
“We’re a mirror to our customers. If our customers are profitable, we’re profitable. … Typically, community banks do the same thing,” he said.
Several years ago, Stone made the decision his bank would carry its own mortgage notes.
“We didn’t have a mortgage department at that time. I decided we would be better off setting up our own mortgage department. I could make loans to people I know, for houses I can walk through,” he said.
“I like to be in a deal where I know what I’m doing.”
That decision has staved off the repercussions of dealing with the secondary mortgage market. Stone said the nine biggest banks hold 90 percent of the deposits in America. Sub-prime mortgages filled those banks with (mortgage-backed security) bonds.
Customer’s financial security comes first, he said.
Tressell said Cannon’s future growth is closely tied to how Clovis will fare in coming years, he said.
“We have an interesting, somewhat isolated local economy. We went through our hard times with the base reductions but overall, long-term down the road as the base continues to grow, the hope is that we don’t see what a lot of the other cities will. … hopefully we’ll come out not too badly bruised on a local level.”
Local small business
Gordon Smith, business specialist with the Small Business Development Center at Clovis Community College, provides advisement services to small business owners. Smith said his office has not seen any local fallout from recent market instability and the passage of the bailout plan.
But a tightening of lending standards for small businesses seeking short and long-term credit may emerge. Increased scrutiny, credit checks, down payment requirements and frowning on large amounts of unsecured debt are all factors commercial borrowers can expect to be faced with in the near future, he said.
Smith said if business is slow, it is a good time for small business owners to dust off their business plan and attend seminars or re-evaluate their financial structure.
“One of the largest reasons that businesses fail, especially new businesses, is because they’re undercapitalized,” he said.
Business owners, just like private citizens, need to break away from use of credit cards and cash advances or other short-term financing and structure their operations so they take on work they can handle and have enough money to live on.
Commercial Loan Officer Connie Connelly with Western Bank in Clovis said in recent months commercial lending has perked up a little, with business owners expanding and preparing for growth, she said.
“It’s usually a pretty positive thing. It’s a good sign that things are starting to improve,” Connelly said.
Local banks haven’t really suffered in the mortgage crisis because they didn’t engage in sub-prime lending and the majority only extended loans as opposed to larger banks that sold mortgages on the secondary market.
“If you read the legal notices and look at the foreclosures, it is rare for a local bank to be foreclosing,” she said, citing large national mortgage companies as the sources of local foreclosures.
“We did not participate in this, we’re not being bailed out. We’re part of the Main Street that has to pay for this.”
A veteran banker with 35 years experience in the industry, Connelly said she moved to Clovis from New England when the Savings and Loan crisis struck in the late 1980s.
“In Clovis so far this is relatively mild,” she said.
Smith said he believes there is an upturn on the horizon for the area.
Growth at Cannon will likely stimulate local businesses, create demand for new businesses and services and provide labor jobs and contracts.
“They’re going to want products and services that we don’t have (in Clovis),” Smith said.
And with the recent award of $726 million in federal funds for construction and new aircraft at Cannon, Smith said the local economy should benefit.
“(Cannon’s) big concern is that when the work starts, there won’t be enough people to work.”
Terry Christesson, an economics instructor at Clovis Community College, believes Main-Street America is susceptible to economic unrest and changes will affect small communities.
It is a time for people to rethink their spending habits, reduce their dependence on credit and pull back from materialistic pursuits.
“We’ve been in denial about things for a long time (and) we really let our politicians run amuck. The real crisis here is lack of wisdom among our elected leaders — it will take some time to (set things right),” he said. “We just have to collectively decide what we want. We kind of promised ourselves happily every after in the material world.”
In the meantime, fear and panic will only make things worse, a lesson proven through the depression when people pulled their money from banks and lost faith in the U.S. monetary system altogether, he said.
“The real issue they’re trying to stop right now is a panic that becomes contagious,” he said.
“Our monetary system is predicated on faith. If you look back at The Great Depression, the only change that occurred was people’s perceptions.”
David Hemley, professor of finance at Eastern New Mexico University, said there’s no denying times are tough right now for a lot of people.
“People on fixed incomes, who have their money tied up in IRAs, mutual funds or equities — they may be hard put,” he said.
And there are difficulties ahead for people nearing retirement, with money in 401Ks or IRAs — “These people could really be hurt badly. They could take a significant hit.”
Hemley said mortgage rates just jumped from 5.9 to 6.4 percent, making it difficult for some to purchase homes and only those with near perfect credit are able to finance vehicles.
“The lending business is not very good right now,” he said.
Nor is borrowing — “unless you’re willing to pay the interest rates and you meet the credit rating. It’s making it tough.”
It is understandable that there is fear of investing in the markets, Christesson said, but people should not fear banking altogether and small town banks “don’t tend to get caught up in the liquidity crisis near as quickly as the big banks,” he said. The bottom line is if a bank has a good deposit insurance program, the money is safe.
People need to “just keep moving forward. Panic’s the worst thing people can do. That’s when you go from making relatively decent decisions to making absolutely terrible ones,” he said.