Loan losses may put recovery years off
Five Eastern Washington banks serving Spokane have lost nearly $750 million since 2007, and bad loans will keep the pressure on the banks for the foreseeable future, the president of Inland Northwest Bank said Wednesday.
Randy Fewel said Inland, Sterling Savings Bank, Banner Bank, Washington Trust Bank and AmericanWest Bank have also shed about 370 jobs, many in branch systems that extend into Utah and Northern California. All but Banner, which is headquartered in Walla Walla, are Spokane-based.
Banner bought Farmers & Merchants Bank of Spokane in 2007.
Fewel said loan losses at the five banks have increased so far in 2009 compared with 2008. High levels of nonperforming assets – loans on which no payments are being made – suggest a recovery may be as much as two years away, he said.
“We still have a lot of issues to deal with,” he said.
Fewel and two other bank executives, Riverbank Executive Vice President Dean Bellamy and U.S. Bank Vice President Greg Conley, told a group of private investors that regulators criticized for lax oversight of the nation’s financial institutions now scrutinize every loan.
Bellamy said bankers wary of being second-guessed on loan decisions are backing away from deals, especially in commercial real estate.
RiverBank, founded in Spokane three years ago, rode commercial real estate lending to $100 million in assets within its first year, but has retrenched into business and industrial loans in the new economic environment, Bellamy said.
“It’s been a real bumpy ride,” he said.
Conley said he spends most of his time re-rating loans to assure they comply with regulatory guidelines that two years ago were much more flexible.
U.S. Bank is one of the country’s largest, with $265 billion in assets and branches in 24 states. The bank is among the few that have repaid government funds made available under the Troubled Asset Relief Program, but its nonperforming assets have increased substantially, as have those of the local banks.
Still, all except AmericanWest are considered well-capitalized by regulators.
TARP money is partly responsible. The funds, a total $547 million to the local banks, were intended by Congress to encourage more lending.
The bankers said overzealous regulators are making that difficult.
Fewel said banks have been further hindered by Federal Deposit Insurance Corp. assessments imposed to rebuild reserves.
And TARP, he said, has been profitable for the Treasury, which gets a 5 percent dividend and warrants.