NWA Dining Dialogue: Banking world is brighter

For Mary Beth Brooks, the world is a little brighter. The light at the end of the tunnel is no longer a lonely street light humming in an empty subdivision.

Brooks, president and CEO of the Bank of Fayetteville, said she can say for the first time since January 2008: “I think this is going to be a great year.”

She’s seen good and bad years come and go. The University of Arkansas graduate grew up in Fort Smith, the daughter of the politically active and politically connected Mary Ellen and Brad Jesson. Her 26 years in banking has included stops in Fort Smith, Little Rock and Memphis.

The Bank of Fayetteville chief since 2004, Brooks said a top goal in 2013 is to use the improving conditions to “take better care of our employees, customers and our community.”

“From my perspective, from the Bank of Fayetteville perspective, it’s looking much better than what I lovingly refer to as, ‘The dark years,’” Brooks said.

Indeed, the past few years have been tough on a Northwest Arkansas financial sector that was too heavily invested in real estate. In 2008, the number of homes sold in Benton and Washington counties fell more than 20% compared to 2007, and fell almost 34% compared to 2006.

2012 saw the number of homes sold in the two-county area rise above 6,000 for the first time since 2007. (Link here for more on the Arkansas housing sector during 2012.)

LESSONS LEARNED
It was in mid-2008 that Brooks said the reality of the unwinding housing market “hit me on the head like a brick.”

But that was then.

“Most people feel like we, regionally, that we are way past that bottom,” Brooks explained. “Now, that’s not to say we are on easy street. … I think we are at a new normal, where the growth, the economy will be more on a slow and steady pace.”

She also said area bankers “learned their lessons” on getting ahead of housing demand. Like the Bank of Fayetteville, many bankers are reminded each day of those lessons because they still own some of the subdivisions and lots they held in 2009.

“Not all the banks up here are out of the woods, but I think they will get there,” she said.

And it’s not just the housing sector that is improving. Brooks said she is hearing and seeing a more positive outlook from small business owners. They are not yet lining up en masse to borrow money, however.

“It’s a cautious optimism. … They’re not all ready to hire more people or expand, but in general, the overall outlook is that they are really feeling better,” Brooks said.

DODD-FRANK FRUSTRATION
But it’s not all warm and fuzzy. Brooks’ positive demeanor disappeared faster than a flimsy deposit slip in strong winds when asked about Dodd-Frank.

Named after legislative authors U.S. Sen. Chris Dodd and U.S. Rep. Barney Frank, the “Dodd-Frank Wall Street Reform and Consumer Protection Act” was signed into law on July 21, 2010.

It was passed in response to the near financial collapse of the U.S. banking community in 2007-2008. Advocates of the law say it will prevent banks and other financial institutions from essentially creating a financial house of cards. Conservative opponents say it is overkill regulation that will make economic recovery more difficult. Liberal opponents of the bill say it goes too far in providing security for the financial sector.

Most bankers dread the law, not necessarily for political reasons, but because the law left most of the details up to federal agencies. Those agencies have been slow to trickle out the new rules.

“It’s the fear of the unknown,” Brooks said when asked her opinion of Dodd-Frank.

“There are still thousands of pages of new rules out there. … I want to know what the rules are before I start the game,” she said.

Continuing, her analogy was one of a football game, in which a wholesale rule change is made at halftime and players are trying to understand them as they walk back onto the field for the kickoff.

“And the third quarter rules may change in the fourth quarter,” she said with a laugh borne more of frustration than humor.

She also feels sorry for the thousands of regulators who “often have little time to learn the new rules before they fan out” to thousands of banks to audit their books.

Brooks does not think those who supported the new law did so to reduce the number of banks, “but that’s what will happen.” Not all smaller regional and community banks have the resources to absorb the new wave of rules. Her argument is that the law squeezes banks by adding costs while reducing the areas in which they can generate revenue.

That said, the Bank of Fayetteville is not likely to be a Dodd-Frank casualty, but Brooks says there are many banks around the country that may not be able to afford the weight of one more straw.