State’s banks are strong, but can they survive reform?

Louisiana banking is alive and kickin’. That’s the message being spread by bank officials all across the Tri-parish area who say the local and statewide banking system is doing just fine, despite the broader problems that are plaguing the rest of the country.

“Things have improved a pretty good bit lately,” said MidSouth Bank CEO Rusty Cloutier. “The economy is improving and it really seems as though some of our customers are coming back and are wanting to borrow money. Before, we had a tremendous problem, because no one even wanted to talk about loans, so it’s definitely an improvement.”

The United States’ and now, also, the world’s recession arguably affected the banking industry harder than any other component of the economy.

Things reached their climax in early 2009 with the Troubled Asset Relief Program (TARP), which bailed out the banks in their time of need.

But despite the doom and gloom prognostications from experts in the field, Louisiana has always been able to stay head above water because of the state’s very low unemployment rates – a trend that continues now according to Mark Folse, CEO of Coastal Commerce Bank.

“The banks here and really the banks across the state are still doing much better than the national average,” he said. “That trend has continued to hold up since the meltdown started a year and a half ago, through the most recent data, which would take you through the end of March … So we’re faring very well … By and large, we’re not seeing the credit equality problems that other states are experiencing.”

And even more so in the Tri-parish area where jobs are available – a rarity during the recession.

“Louisiana banks are fortunate compared to other banks in the country, especially in the Tri-parish area where you guys have one of the lowest unemployment rates in the country,” said Robert Taylor, CEO of the Louisiana Bankers Association. “The fact that Louisiana’s overall economy has done well and Louisiana bankers have done a really good job is because they’ve seen downturns in the past … that’s part of what’s allowing us to do so well.”

Despite the recent success, the coming months will be large for the industry and some concerns are on the horizon – especially for community banks.

Reform legislation is being discussed currently in Washington, D.C., that would up the regulations community banks would have to comply with.

Exactly how the bill would affect the community banks is still uncertain, but it has certainly caught the eye of officials, who wonder what its passage will do to how community banks do business.

“We’re very concerned with some of the language in that bill,” Cloutier said. “But we’ll have to just wait and see what happens.”

Among the things on the fence in Washington is a “Consumer Protection Agency” that would regulate banks.

But Cloutier said the regulations would prove to be costly and inefficient for the community banking system to adhere to.

The MidSouth CEO said instead, he believes lawmakers should be trying to push for cleaning up the larger banks – because they are the ones who usually are the most susceptible in hard times.

“I think they need to start being actually concerned about the community,” Cloutier said of the conglomerate banks. “All they are concerned with is making money on Wall Street. Anything involving people, they could care less. It’s every man for themselves and that’s just the attitude they have.”

Folse agreed and said the “Consumer Protection Agency” will not do what its name specifies.

“It’s all under the title consumer protection, but little of which actually protects the consumer,” he said. “It’s going to be just a mess for community banks, frankly. We’re going to have to comply with rules to fix problems they didn’t have in the first place – none of those fixes will fix the bigger problem with the big banks … They’re using a hand grenade when they should be using a rifle.”

But despite the potential headaches that may be on the horizon, Folse said the banks will persevere – especially in Louisiana.

“We’ve been fortunate that our area has held up well,” he said. “And when we talk to bankers in other states, we realize that things could be a lot worse.”