Get ready to deposit some good news in your mental checking account. Utah Valley banks and credit unions are very much “open for business” when it comes to business and personal lending. In fact, with low interest rates and declining fees, today’

s economic environment is compounding the opportunities for entrepreneurs.

Jeanette Bennett, BusinessQ: How would you describe the current banking environment in Utah Valley?

Richard Beard, Bank of American Fork: It’s not a secret we’

ve had a real change in the economic climate in the United States and Utah. The banking industry is not immune from that. It has been a time of change and getting back to the fundamentals.

Edward Sanches, Western Community Bank: The challenges we are facing are unprecedented. But this has brought out more commitment from bankers. There is the old joke about “bankers’ hours,” but lights are on late in managers’ offices. This is directly related to the commitment bankers now have, not only to their clients but also to the community they are serving. Bankers are pulling together.
Thomas Morgan, Zions Bank: Today’s challenges are affording us a tremendous learning opportunity. For our industry to be vibrant, we have to be good at what we do, and if we get complacent because times are really good and things go smoothly all the time, we get into a rut. Unless our protocols, our theories, our processes are tested, then we don’

t know whether we are good or not. It gives us an opportunity to test our resolve, to test our ideas and to test our credit scoring methodology. This truly is the real stress test for all of us. The next generation of banking will be an improvement on the last one if we learn from where we are at.

Leonel Castillo, AmBank: In general, banks in Utah are in pretty good shape, particularly in Utah County where we are well-capitalized and well-run. Our area banks have done a lot to help businesses stay in place. However, there has been much discussion about there being no money available and about banks being self-interested corporations with total lack of empathy for the customers they serve. In Utah County, that is simply not accurate.

Bennett, BusinessQ: What do you want people to understand about the banking industry?

Castillo, AmBank: We are part of the community whether we are a small institution or a regional bank. If you, as a consumer, have an issue, give us a call, come in, and let’

s see if there is a way we can find common ground.

Don Norton, Far West Bank: The banking industry has really made Utah an effective leader in the development of small businesses. From the small bank to the regional bank, we are all committed to the customer and to helping create an environment that encourages new business.

Mark Drake, Family First Federal Credit Union: Even though the economy has slowed down, Utah County is still doing well. We still have people applying for money, and we are still granting the credit.

Bennett, BusinessQ: The perception exists that it is difficult to borrow money right now. Is that true?

Beard, Bank of American Fork: We have gone back to being very careful about credit, and that by its nature tends to tighten things up. At least speaking for our bank, we are still very much open for business. We are making loans to credit-worthy customers. Small business lending is still an active area. As this economy pulls out of this lull, we will see more lending to small businesses.

Morgan, Zions Bank: The perception of a cutback in lending largely comes from a national perspective where there were untraditional lenders in the credit arena. The subprime and untraditional lenders created an unsustainable growth. When they fell apart, everyone began thinking that nobody is making loans and that they can’

t get the money like they used to. But in reality, we have simply come back to prudent, smart, conservative lending practices that have been the foundation of all these lending institutions here today.

Drake, Family First Federal Credit Union: I’m sure everyone in this room has been asked by someone, “Are you still lending money. Did you quit?” The basic principle that people need to understand is that banks are in the business of loaning money. If we don’

t loan money, we are out of business.

Castillo, AmBank: The lending industry got carried away with too many exotic financial instruments. What’

s happened over the past six to nine months is a reset in going back to those standards of loaning to people who have good credit, a down payment, and are able to show how they can make the payment. The second part of the change is that with the downturn in the economy there has been a reset in the values of real estate. Over the past five years land became so expensive that few people could afford it. This reset is painful, but it will ultimately be a good thing for everyone.

Beard, Bank of American Fork: Capitalism is an efficient system if you’ll let it work, and it has to be able to punish those who get too far out of line. There were a lot of financial institutions that got out of the proper parameters, and they paid the price. Capitalism does that —

it cleanses itself.

Norton, Far West Bank: Unfortunately, the whole industry has been painted with the same brush based upon the effects of Wall Street and these funky mortgage instruments that were established. There was an attitude of, “You’ve got to lower the standards so that every American can be a homeowner.” In Utah, foreigners and strangers came in to lend money, and their standards weren’t like ours. But we didn’t lower our credit standards. Now, customers are saying, “Wow, that loan was a good deal while I had it, but now I’ve got all this property and nothing is selling.” It’s been very dramatic to see what I would refer to as foreigners that didn’

t have the basic principles of the banking industry.

Morgan, Zions Bank: For all of us, it’

s back to the basics. Discipline is a good thing. It may seem restrictive, but in the end discipline will be the thing that has saved our ability to give credit to the people who are qualified.

Sanches, Western Community Bank: No bank right now or finance institution wants to bring on new loans that are going to be trouble for them. No bank really ever has. What caused the recession wasn’

t commercial banks like ours. In reality, it was the mortgage and investment industry that said everyone deserves a home, no money down. Consumers got in their mind that all banks should offer that. Some banks did get sucked into that and now they are feeling the ramifications. For the majority of Utah Valley banks, it is business as usual for qualified borrowers.

Bennett, BusinessQ: Where will we go from here? What do you see happening in the next year within the banking industry?
Beard, Bank of American Fork: You’re going to see slower growth in banks as they cleanse themselves. I’m not one that believes the economy is headed into depression. We always come out of these cycles, and I don’t see any reason to believe any different this time. As we come out, business will continue to operate, the housing industry will continue to see movement in the lower-priced homes, and the ones that were overpriced will come back into line. People that built those will be hurt —

banks and builders. But capitalism will do its thing and the market will get back into balance.

Castillo, AmBank: Regardless of what you think of the government’s efforts to stimulate the economy, there are some real opportunities for a cross-section of individuals. The combination of federal and state initiatives to help first-time homebuyers is a real opportunity for those who have been priced out of the market. Those programs together with some of those falling prices will create an excellent opportunity for investors. For small businesses, the government has increased the size of the SBA guarantee and they’

ve also eliminated some borrowing fees. So in the next year, while we still have a lot of issues to sort through, there will be a tremendous amount of opportunity for everyone.

Morgan, Zions Bank: We take our place in the community as leaders. We lead by example. We do the right thing internally first as individuals in our own families, and then in our institutions. We do the prudent thing. Every one of us are relationship bankers. The fundamental ingredients are the relationships that we build. When we build those, we take a leadership role in not encouraging our customers to get overextended. We don’t encourage our customers to live beyond their means. We don’

t encourage our customers to use substandard assets in order to get ahead. We lead by encouraging our client to do the right thing, and as partners we together improve this economy.

Norton, Far West Bank: We’

ve seen historic highs for the past three months in the volume of refinances. The incentives will begin to take care of the excess new home inventory that has been built up through speculation.

Drake, Family First Federal Credit Union: Everyone wants to focus on the good news. But there are legitimate times when things are problematic. If things are downturning for you in your personal life or business finances, go in and talk to your banker before you get delinquent. It’

s a lot easier at that point for the banker to work with you.

Sanches, Western Community Bank: It’s not even that we need good news, we just need the absence of bad news. There’s been so much negative media focusing on all the troubles that it has caused people to completely restrict. Jobs are going to be the driving force. Historically, Utah unemployment has been lower than the nation. Utah’s unemployment is 5.2 compared to 8.5 nationally. Even though we are going through difficult times, it’

s not as deep as what is perceived out there.

Bennett, BusinessQ: You all have a good pulse on the community and the economy from your perspective as community bankers. What are some examples of good news in our community?

Beard, Bank of American Fork: Take an area like Saratoga Springs. Right now there are tons of homes for sale and it looks bleak. But by 2040, Saratoga Springs will be home to about 240,000 people. All of those people will have to live somewhere. All of those people have to have a job. All of those people go to restaurants and buy things. We have a good population growth in our area. Utah tends to historically be late going into recession and it doesn’t go as deep as the country’

s recession.

Morgan, Zions Bank: In a downturn, there are qualified borrowers who stay away from looking for an opportunity to borrow until they see what is happening. What we have seen just recently at Zions is the re-emergence of qualified borrowers. That is good news. Qualified borrowers are coming back.

Castillo, AmBank: I believe the people in the valley are good news. While we were all shell shocked last year, we have a bright population and we have a motivated population. I think we are going to see new businesses come up. We are going to see people who are adjusting to difficult circumstances. They are going to make lemonade out of lemons. They are looking for the silver lining in the storm cloud. I think the quality of the people in the valley and the opportunities that are here are good news.

Sanches, Western Community Bank: The good news in the banking industry is that short and long-term rates are at all-time lows. For those who are qualified, short term rates are very low. Mortgage rates are very low. Compare that to what we went through in the 1980s … granted I was in elementary school …
Norton, Far West Bank: I’ll tell you about the ’

80s. (laughter)

Beard, Bank of American Fork: Look at what has happened in the housing industry. Two years ago, there were all sorts of houses for $800,000 and $900,000. Now the billboards are advertising homes for $180,000 and 200,000. We are adaptable. Builders are getting efficient enough that they can build a $200,000 home and people in the valley can afford a $200,000 home. That entrepreneurial spirit is adaptable.

Bennett, BusinessQ: How should a business pick a banking institution? What should go into that decision?

Norton, Far West Bank: Initially you have to understand that each bank has a strategy. We all provide the same kind of a product: checking, savings, money markets, merchant cards and credit cards. But we each have a strategy as far as what our portfolio looks at. We are very entrepreneurial, and we enjoy working with entrepreneurs who have great ideas. Sometimes they forget about the importance of the financing and accounting. They need to mesh their ideas with people who have finance backgrounds. You bring the idea and let’s see how we can help you develop that. We see great ideas coming short of capital and they just need us to lend them the capital. When an idea for a business is a good one and we know it will work, it’

s a no-brainer for us. The banking industry is here to help.

Castillo, AmBank: If I was out looking for a financial institution I would do research regarding that institution and what sorts of credit they offer. All of us have certain types of products that we like better than others. As a startup business I would find an institution that has a history of funding startups. Since having working capital is the lifeblood of business, I would develop more than one relationship. In the event the primary financial institution has determined they can’t help you, it’

s good that you have established some other relationship. The other thing I would be prepared to do is move all your primary deposit accounts and personal account so you have a whole relationship with that financial institution. That gives all of us a greater comfort to see how John Doe manages not only their personal account but their business account.

Sanches, Western Community Bank: If I were an entrepreneur going out to find a bank, I would research. When you buy a camera you do homework, and it’

s no different looking for a bank. You want to find someone who is going to be able to relate to you.

Beard, Band of American Fork: Money is all the same in a sense, but at the end of the day the best thing bankers can do is help small businesses understand what financing is. A lot of people understand how to make a widget, but they don’t understand that the cost of the money to make the widget is an important piece. So if you have a brand new startup and they come to a bank and they want venture capital, they are shopping in the wrong place. A banker does a great service to sit down and explain that there are different pots of money. A venture capital pot of money is a different kind. It has a different return. It has a different risk profile. If they try to shop that kind of a deal at a bank they are going to get really frustrated and go back to the idea that there is no lending being done. The person needs to understand — and the banker needs to explain —

what types of financing banks can offer. The days of drive-by lending are over.

Bennett, BusinessQ: What are some bank services that people aren’t utilizing or don’

t understand?

Beard, Bank of American Fork: Consulting is one of them. Obviously banks give money in a loan, but too many people, and particularly businessmen, think, “That’s all I need is the money.” But relationships are important. Relationships are rewarded. In our bank, for example, we have a product called “My rewards,” and it gives a high rate of interest if you’ll bring your whole relationship to the bank. We can afford to do that if people will be totally at the bank. It’

s like frequent fliers in the airlines. You can give people a higher yield on checking accounts and maybe lower rates in terms of borrowing, but there has to be some commitment to a relationship.

Sanches, Western Community Bank: Internet banking has come a long way, and there are a lot of tools that may not be fully utilized by small businesses. For example, small businesses can pay employees through direct deposit. It makes it much more convenient.

Morgan, Zions Bank: I do think the industry has some tremendously robust treasury management products these days that are very helpful for small-, medium- and large-sized businesses. Not everybody understands our industry. Find a trusted adviser who can communicate with you, and it helps you understand what a partnership with a bank can be. Find an institution where you say, “This is the place for me.” Then the next step is to find someone within that institution who you can connect to. At the end of the day it’s all about that interpersonal communication. In addition, if you get in trouble or if you think you might be in trouble financially, it’

s important to go to the bank and talk to them. Work it out in the beginning before it becomes a major issue.

Bennett, BusinessQ: What is happening in the world of small business loans?

Castillo, AmBank: SBA lending allows us to make loans on terms you wouldn’

t normally find. For example, it allows for a longer amortization period. That helps the business with cash flow. On the real estate side, the SBA 504 program fees have been eliminated. Now is a good time for businesses to explore the purchase of their own facility. The 504 program provides an excellent combination of rate, cost and terms that are extremely beneficial to a borrower.

Norton, Far West Bank: The perception for a long period of time was that government lending products have horrendous paperwork. People wondered how they were going to muddle through it without a finance degree. But that perception needs to go away. Government loans are much more streamlined now.

Bennett, BusinessQ: As we close our roundtable, what are your final thoughts you’d like to share with Utah Valley’

s business community?

Drake, Family First Federal Credit Union: One of the key things we talked about today is banker relationship loyalty. As you pick a bank or a credit union, you need to find someone you can relate with and who understands your needs. Banks and credit unions are in the business to loan money. For someone to say there’s no lending out there would be to say McDonalds doesn’

t sell hamburgers anymore. Banks and credit unions are there to lend money. We want to be your financial partner.

Sanches, Western Community Bank: Banks in Utah County are, for the most part, strong, well-capitalized and actively looking for clients. It really is refreshing. Now we’

re seeing the resurgence of qualified borrowers coming into the institution. There are less people coming in to borrow money, but those who are coming in have the capability to repay what they are asking for. In general, I want to reiterate that Utah Valley banks are strong, secure and well-capitalized. We are in business to lend money.

Castillo, AmBank: Difficult times, whether professionally or personally, help us all become better people at whatever it is that we do. Periodically we have to go through these periods to sharpen our skills. Together with that difficult time are some wonderful opportunities.

Morgan, Zions Bank: I add my statement of confidence related to the institutions in Utah County. We are partners ready and willing to help small businesses and large businesses alike. I personally believe, not on behalf of Zions Bank, that we have been forced into a correction that was a necessary correction. Values on properties have come down because they were unsustainable values based on easy money. If we as individuals and families will learn from what has gone on and do not overextend ourselves — if we live within our means — we can learn from the challenges that we’

ve seen. How do we improve the economy? It starts with me and my family and you and your family. In our homes, we do the right thing in our little economy and that improves the larger economy.

Beard, Bank of American Fork: There is sometimes a misperception, even in Utah, of what a bank is. When you look at what happened with Lehman Brothers that filled the news last year, those are investment banks, not commercial banks. A lot of the correction has occurred on the investment banking side. Here in Utah I don’t know that what played out on the national news really affected or changed what we do. Individual banks are looking at ways to operate prudently. I’

m cautiously optimistic.

Norton, Far West Bank: The people and the American spirit are going to confront challenges and do what’s right and make it better. We have to understand it isn’t all doom and gloom. Because of Utah values, we’

re going to bounce back much quicker than investors nationwide. Their eyes are on Utah. We are slower going down and we come back quicker than anywhere else out there in the country.

Bennett, BusinessQ: Thank you for your banking insights.

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