Ask any real estate broker these days about the hardest part of their job, and they'll tell you it's finding a lender to fund a deal. As the credit markets have seized up, some banks are turning sour on letting go of their money.
The challenge for Metro Atlanta banks has been their lending in the residential real estate development market. As the residential housing market has taken a steep dive, many banks are getting bogged down in taking back undeveloped lots and vacant houses. Further, their focus has been on selling these assets, mostly at some substantial losses.
However, a few local banks are resisting the trend and pushing forward with lending. One such bank I spoke with, Community Business Bank of Cumming, is loaning money. The bank is one of six banks that started business in Georgia in 2008.
Carter Barrett, president and chief lending officer of the bank, in commenting on the bank's creation, said “As many banks as there are, you wouldn't think that there was a sliver of opportunity for a new bank. But we saw an opportunity to create a bank run by business owners for business owners. "
Timing has been everything for Carter's bank. While many banks have been focused on clearing their foreclosed assets off the books, Community Business Bank has no such assets. Their charter was approved in 2007 and they started business in January 2008, just as the construction and residential market was plummeting. This has afforded them some unique opportunities by being able to focus on strong properties with good fundamentals.
Another local bank in a good position from a timing standpoint is First Milton Bank. First Milton is in the process of raising funds to get started in the business banking community. Their positioning in Milton as the city's first bank with preliminary approval from the FDIC gives it some exceptional opportunities. They'll be starting out with no bad debts; thus, providing them the freedom to go after opportunities that other banks can't. They plan on opening for business in the first quarter of 2009, and opening their new building on Highway 9 in the latter part of the year.
Jeff Sanders, chief financial officer of the bank, explained that rising interest rates are good for a bank's bottom line. Certificates of deposit are fixed costs for a bank, while most of a community bank's loans are prime-based variable rate loans.
"This is a great time to get into the game; it's the bottom of an economic cycle and the bottom of the interest rate cycle, " he said.
In speaking on the difference between community banks and regional banks, both gentlemen agree that they have an opportunity to provide something that the big banks have trouble providing. Relationships with their customers are the key. As the regional banks continue to get bigger, they lose the banking relationships that used to be enjoyed. The community banker will know you and your business, the bankers said.
Carter Barrett further brings home the point.
"It used to be that big banks were known for better products and the small local banks for better service. But now the small banks can provide the same product as the big banks, " Barrett said.
I'd like to think that the business of traditional banking, of trust, relationships and personal attention, will become more common. And, from what I can see, the small community bank will continue to be a big player in this arena.
Brian Patton, CCIM, owner of Capital Realty Advisors, LLC, of Atlanta, Georgia, is an author, columnist, and speaker on commercial real estate issues.