Each year it seems that someone or other will comment on the “green shoots” that seemingly presage the end of the banking crisis. More often than not, the green shoots were simply the product of an overactive imagination.
There was recent news from the FDIC though that I think qualifies pretty strongly as green shoots material. On September 14 the FDIC announced that it will be closing down its Midwest Temporary Satellite Office located in Schaumburg, IL toward the end of September 2012. The FDIC had previously indicated that the office would remain open until the end of the second quarter of 2013. The FDIC had announced earlier this year that its West Coast Satellite Office will close January 30, 2012.
The Southeast Temporary Satellite Office located in Jacksonville is theoretically scheduled to stay open until the end of 2013 due to the larger number of bank receiverships located across Georgia and Florida. I believe, however, there is a fair chance that the late 2013 date will, in fact, be moved up closer to early 2013 or even late 2012 based upon a review of the latest CALL Reports. While there are still a fair number of troubled banks moving through the FDIC pipeline toward receivership the numbers of troubled banks are definitely in the decline.
There is a corresponding decline in the number of new problem credits banks are seeing. Whereas a year ago bank special assets departments were bringing in two new credits for each one they resolved, now the ratio is one to one or even less. There is also much more internal pressure at institutions to rehabilitate credits if possible so that they can be moved out of special assets and back to the line.
Banks clearly face tremendous challenges due to the sluggishness of the national economy and lack of new loan demand. There are other challenges as well as banks move out of real estate and into C&I lending and we all deal with the deleveraging that the American consumer is experiencing. Even acknowledging all of those issues, however, over the next twelve months we should see much less focus on Texas ratios and much more attention on how do banks grow business after having survived the great financial panic of 2008.
Boards and senior management need to be focused on the issue of organic growth and how to best accomplish it. In some cases it may be more appropriate to consider strategic acquisitions. In any event, the role of careful strategic planning on the part of boards and senior management has never been so important. Whether you do it with a banking consultant that you have dealt with for years or one of our experienced lawyers, the key is to plan now in order to control your future.