Don Davis, Published October 07 2009
Regulators watching 71 Minnesota banks
“It’s just a matter of prudent lending and risk management,” Noah Wilcox told the state Senate Commerce and Consumer Protection Committee on Tuesday.
Wilcox and other bankers told senators that the media is feeding a frenzy by reporting about “risky loans” being made by American banks. But, he said, he does not want to risk Grand Rapids State Bank money “because it’s my family’s money.”
Deputy Commerce Commissioner Kevin Murphy said state and federal regulators are watching banks and credit unions to make sure they are financially sound, “keeping in mind that these are private institutions that rise and fall on their own.”
Regulators check each institution every year or year and a half, although quarterly reports sometimes tip them off to problems even quicker.
Four Minnesota banks have failed this year, the most recent of which was Jennings State Bank in Spring Grove and Stillwater last weekend. A Federal Deposit Insurance Corp. official said customers barely noticed a difference because the bank closed Friday night, changed owners and reopened Saturday morning.
“You can buy a bank over a weekend with minimal paperwork,” Murphy said, adding that only larger, stable banks can purchase failing ones.
Murphy said that of the 71 banks regulators watch, 30 are in a more serious category. He said in most cases bankers and regulators work together to avoid closures.
A year ago, regulators were concerned about 50 banks.
Across the country, 416 banks have serious problems, the FDIC’s James LePierre said. Of those, 98 have closed. That compares with 25 that closed last year, three in 2007 and none in the two previous years.
Nationally, many of the troubled banks are in metropolitan areas, unlike 25 years ago when most were in rural areas. Murphy said about half of Minnesota’s problem banks this year are in urban areas and half in rural areas.
A solid farm economy is credited for the improved story from the 1980s, when 46 Minnesota banks failed.
“We are very blessed to be agriculture based,” said Marshall MacKay of the Independent Community Bankers of Minnesota.
Bankers said their business trails the economy as a whole, so any recovery will take some time for them.
“I would venture to guess it might be a bit bumpy,” Murphy said.
Davis works for Forum Communications Co., which owns The Forum. He can be reached at (651) 290-0707 or firstname.lastname@example.org