By Mark Wineka and Elizabeth Cook
mwineka@salisburypost.com
Many of the state’s smaller community banks have accepted money from the federal government, but officials at these banks bristle at the notion they’re receiving a government bailout.
“We look at ourselves as part of the solution, not part of the problem,” says Paul Fisher, chairman and chief executive officer of F&M Bank, based in Granite Quarry.
Roughly 500 of the nation’s 8,000-plus banks, including about 25 in North Carolina, have received TARP money so far.
F&M Bank has received $17 million from the U.S. Treasury Department’s Troubled Asset Relief (TARP) program.
But F&M actually applied and received its funding through a second TARP initiative called the Capital Purchase Program.
“Simply,” Fisher says, “the additional capital will allow us to make $80 million to $90 million in new loans. Other local banks who are also part of the program will have additional capacity as well.”
Institutions such as F&M, Bank of North Carolina, Community One, Citizens South and First Bank ó all of which do business in Rowan County ó say their participation in the Capital Purchase Program is acknowledgment of their being healthy banks with strong capital positions.
The U.S. Treasury injected money into their financially stable banks, they say, to help them build even more capital and support new lending.
In response, the community banks have initiated lending programs aimed at helping builders, developers and qualified homebuyers.
First Bank, based in Troy, has received $65 million through the CPP program.
“Many people may think that banks that accept Treasury funds are part of the problem,” First Bank President and CEO Jerry Ochletree says, “and we want to assure people that is not the case for First Bank.
“We see participation in this program as a vote of confidence, and we’re privileged to have the opportunity to make a difference in the lives of our customers.”
Offering incentives
Citizens South, CommunityOne and Bank of North Carolina also have programs aimed at bringing together builders and developers who are their customers and providing the types of incentives such as lower mortgage rates and no closing costs to attract buyers for them.
Mark Lewis, regional executive and senior vice president for Bank of North Carolina, says his bank has reserved $100 million for three different programs aimed at helping consumers and the bank’s builders and developers.
Bank of North Carolina has received $31.26 million in TARP funds.
“We realize that the capital enables us to go out in the marketplace and provide mortgages, lot loans and construction permanent loans,” Lewis says.
For everyone involved, it’s a “win” situation, he adds.
Mark Hensley, executive vice president and chief banking officer at Community One, says his bank also is using TARP funds to help developers market and sell their lots and assist builders with their speculative houses.
The bank also offers a special mortgage program for condominiums and town homes.
“We feel like we’re well positioned to ride this economy out and work with customers,” Hensley says.
Mortgage rates are not the thing discouraging homebuyers, he says, noting “we’re in a low cycle for rates anyway.”
For sale
The bigger issue for homebuyers is that they have another house to sell ó something that has been difficult during the economic downturn. To address that problem, CommunityOne offers a bridge financing program.
CommunityOne, based in Asheboro, has received $51.5 million in TARP funds. The bank’s history goes back 102 years, and it hopes to be around for another 102, Hensley says.
“These funds allow us to do that and work through this time frame,” he says.
Gastonia-based Citizens South, which has received $20.5 million in TARP funds, was one of the first banks in North Carolina to announce that it would use the capital to create a 30-year loan program with a starting interest rate of 3.5 percent ó an effort to stimulate the housing market.
The loan program has a maximum rate of 5.5 percent and no closing costs. It tries to bring together the bank’s builders and developers who have extra housing stock or residential lots and match them with consumers looking for the best possible rates.
The participating builders and developers agree to pay the closing costs on the mortgages as another form of assistance.
Kicking the tires
Brian Miller, an executive with Citizens South in Salisbury, says a few loans under the program have already closed, “and more are in the pipeline working their way through the process.”
“So far we would consider it a success,”‘ he says. “… We seem to see more activity ó people kicking the tires.”
Community Bank of Rowan has not received any TARP assistance, though its Michigan-based holding company, Capital Bancorp., applied for it.
Bruce Jones, president and chief executive officer of Community Bank of Rowan, says his bank would have gladly accepted TARP funding. “It’s a great boost of your capital to get through this difficult time,” he says.
But his bank still has adequate capital to keep making loans without TARP money, according to Jones.
“The biggest key is we’re lending in local markets that we know,” Jones says. His bank is giving “extremely favorable” financing to its customers, he adds, because “I don’t want to own real estate, so I want to get it off my portfolio.”
Gas in the tank
F&M, which has been doing business in Rowan County for 100 years, decided five years ago as part of its growth strategy that it would go to the capital markets in 2010 for additional funds.
“As we approached 2010,” Fisher says, “we found that the normal capital markets were virtually destroyed by some large mega banks, national mortgage companies and Wall Street financial firms.
“… Since the normal capital markets had vanished, F&M applied for and was quickly approved for the CPP program.”
Fisher says that not knowing how long the current recession will last was another reason F&M decided to purchase additional capital from the government.
“Saying it another way,”‘ he adds, “when taking a long trip, one always makes sure that they have enough gas in the tank to make the trip safely. At this point, there was only one gas station open ó the government’s CPP program ó and F&M felt that it was prudent to fill our tank.”
Fisher emphasizes that F&M has never stopped lending.
“Lending to good credits is something we do daily,” he says.
F&M intends to pay back its CPP funds as soon as the private capital markets are restored, and most of the community banks say they will repay the Treasury within five years because, after that point, the interest rate jumps from 5 to 9 percent.
Capital for growth
In a February e-mail to employees, F&M President Steve Fisher explained the bank’s reasons for participating in the Treasury Department’s Capital Purchase Program.
He wrote that there were seven “basic take-aways” for the employees to remember:
– Capital is important to the health of any bank.
– F&M already knew it needed more capital for future growth.
– Because of the current economy, capital is not available.
– The government is offering capital to healthy banks.
– F&M is taking advantage of the CPP the same as its competitors.
– F&M plans to pay back the money over the next five years with interest.
– “And it’s a good thing for our bank and our economy.”