Good credit the key to obtaining a loan
Media often reports that banks are not lending, but bankers in Marion County beg to differ with that.
“Most community banks have ample funds available to good quality lenders,” Marion National Bank President Jim Hefley said. “Banks here in Marion County are eager to loan money, but the regulations aren’t allowing us to grant as many loans as a few years ago.”
Small banks get funding for loans from their depositors.
Central National Bank President Todd Heitschmidt said the regulatory burden is significantly heavier since the passage of the 2,500-page Dodd-Frank Bill in 2010. The additional government oversight makes it harder to loan money, and increased documentation requirements make banking operations more expensive.
Heitschmidt said community banks are suffering for mistakes made by the big corporate banks. He said because of other banks’ failures, successful, well-managed banks are being required to replenish the Federal Deposit Insurance Corporation fund.
Hefley said federal regulators tend to look at small banks as expendable. They don’t realize the impact small banks have on the viability of a community, he said.
He said loan demand is down because of the slow economy, and excess deposits that are invested by the banks do not produce much return, so profit margins are tight.
Heitschmidt said some people seeking to refinance a loan couldn’t do so because of changes in regulations, such as the demand for higher credit scores and higher income-to-expenses ratios.
Cynthia Fleming, president of Hillsboro State Bank in Hillsboro, said her bank, like other local banks, is being required to provide more and more documentation to get a loan approved, and she expects it to get worse as more and more regulations come down the pike.
“The government is trying to protect customers, but they have gone too far and are making it more difficult for us,” she said. “We know our customers, and we have good people who could use the money but we can’t help them.”
Fleming said appraisals for real estate purchases are required to be much more detailed than in the past.
“There is so much more to look at and follow up on,” she said.
Like other banks, Hillsboro State Bank has plenty of money to loan. Money not loaned is invested in government securities or certificates of deposit in larger institutions. Fleming said if the money could be loaned to customers, the bank would make more money and customers also would benefit with higher interest rates on savings and lower charges on services.
She noted that the trend is for smaller banks to merge with larger banks, but she is not looking for that to happen with her bank.
“It’s a challenging time,” she said. “It’s just not as much fun anymore.”
Hefley expects his bank to survive the current situation and to be in business for many years to come.
“We have a crisis of confidence in our economy,” he said. “Consumers are cautious. It will get better, and we will be ready to help businesses expand,” he said.
All of the bankers agreed that the important thing for their customers — whether consumers, commercial businessmen, or agricultural producers — is to maintain good credit by paying bills on time and speaking with creditors if there is a payment problem.