By JOHN HOFHEIMER
Leader senior staff writer
The $700 billion economic bailout President Bush signed into law Friday afternoon may have been necessary, according to hometown banker Larry Wilson, but so far none of the dire effects threatened by proponents have surfaced here, at least not in locally-owned community banks.
Wilson thinks the national media have contributed to a false notion that credit is frozen, businesses, home buyers and car buyers can’t get loans—that there has been a credit constriction.
“It seems to feed on itself,” he said.
Wilson, president of his family’s First Arkansas Bank and Trust, said his bank may have slightly tightened credit requirements on mortgages and various loans, but that there has been no constriction of credit here.
If people are having difficulty getting short-term credit—California Gov. Arnold Schwarzenegger has asked U.S. Treasury Secretary Paulson to loan the state $7 billion for payroll and expenses—it hasn’t shown up in Arkansas, Wilson said.
“Our depositors are still depositing,” he added. We still have that money to lend.”
First Arkansas headquartered on Main Street Jacksonville, has 26 branch offices ranging from North Little Rock to Marshall.
“We have money available for loans like always,” Wilson said.
He said loan officers might pay a bit more attention to the job history of a mortgage applicant or the solvency of the applicant’s employer.
First Arkansas Bank and Trust originates about 500 to 600 mortgages a year, generally selling them to a secondary market.
By way of comparison, the bank wrote 35 home loans in September 2007 worth $4.4 million. In September of this year, the bank wrote 43 home loans worth $6.2 million. That’s more mortgages for more money.
He said there has been no change in the amount of money needed for down payment terms or in interest rates, he said.
“We were never involved with sub prime mortgages,” Wilson said. There is no deposit drain. Our bank is strongly capitalized.”
Mortgage initiators are required to buy back bad mortgages within one year, Wilson said. “In seven or eight years we’ve had to buy back one mortgage.”
“We are the largest bank with the highest capital-to-assets ratio.”
He said some larger banks with significant portfolios of sub prime mortgages might be short of capital.
“I suspect that locally owned banks in Arkansas aren’t having that problem.”
“All banks have a little more difficult time in an economic downturn,” Wilson said.
“Our banks are handling the economic downturn fairly well, holding our own,” Candace Franks said Friday afternoon. She is state Banking Commissioner, and her take was about the same as Wilson’s.
“I have a few banks that have problems, but a few do time to time. Profitability is down industry-wide. But we didn’t get into sub prime loans. Community banks are pretty conservative.”
She said the bailout would help with liquidity issues worldwide.
“I’m pleased to see the increase (from $100,000 to $250,000) in federal deposit insurance,” she said. “The Public had been concerned.”
“I’m fairly optimistic that we will do fairly well during the (economic) downturn,” Franks said. “We don’t have the peaks and valleys in Arkansas. Our banks tend to be pretty conservative, focused o their communities.”
“For our market and our customers, money’s available,” Wilson said. “For people with good credit, a good job and good income, they aren’t going to have trouble getting a loan.”