By WSJ Staff
Amy Merrick reports from Rockford, Ill.
Count R. Robert Funderburg Jr., chairman of Rockford’s Alpine Bank, among the many community bankers who aren’t happy about the ongoing rescue of big Wall Street banks.
This morning, Treasury Secretary Timothy Geithner announced plans for a broader bailout that could pump $2 trillion into the financial system.
“It’s an outrage that average citizens and businesses need to pay for Wall Street’s avarice and greed,” Mr. Funderburg says. Of the TARP funds being lent to financial institutions, he says, “we didn’t cause the problem, we didn’t participate, we don’t need it, and we don’t want it.”
Executives at Alpine are frustrated that the cost of their FDIC insurance is increasing to close to $1 million this year from $250,000 last year, to help replenish the government funds that are being used to guarantee deposits in failed banks.
Alpine Bank, with 14 full-service branches, is the Rockford area’s leading mortgage lender. It services about $660 million in mortgage loans, out of a total portfolio of just under $1 billion. But despite Rockford’s climbing unemployment rate, which has reached 12.5%, the bank’s default and past-due rate on its 7,200 mortgage loans has risen only slightly, to less than 0.3%. That’s much less trouble than lenders are experiencing nationwide.
Mr. Funderburg said the bank learned some critical lessons a decade ago, when credit-quality issues prompted it to add to its executive team and implement more-rigorous standards.
“One of the reasons we’re in pretty good shape is that we went through a bad time in the mid-1990s,” he says. “We had very rapid growth in our loans and our presence, and our credit culture did not grow along with it.”
That experience taught Alpine’s executives to be more cautious during the housing bubble. They shunned loans such as option ARMs, a once-popular form of mortgage that allowed borrowers to choose how much to pay each month. Data firm LPS Applied Analytics said 28% of option ARMs were delinquent or in foreclosure as of December.
Alpine’s decision to skip the boom in subprime and option-ARM lending drew criticism inside the bank at the time. “It was difficult for some of our mortgage originators, who felt we were leaving some opportunities behind,” says William Roop, the bank’s president. Now, Alpine is reaping the benefits. Executives hope to capture market share this year from weaker rivals.
The bank has a long history in Rockford. A predecessor institution, Farmers State Bank, dates to 1908; it was saved by Mr. Funderburg’s grandfather during the Great Depression, when he pledged all his personal belongings and the money in his children’s savings accounts to secure a loan.
Mr. Funderburg and the other executives play up Alpine’s down-to-earth image. They use the marketing slogan “a bank you can actually like,” boast of not having an “800” number and cast bank employees instead of professional actors in their homemade commercials.
Upcoming: In future posts, we will follow Alpine as it works with its customers to help them navigate the economy.
Join our discussion: Should solid banks have to help fund the bailout of mismanaged ones?
[...] WSJ – A Banker Who Stayed Out of Problem Loans Fumes at a Bailout for Those Who Didn’t [...]
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I fully agree with the sentiments expressed by the “Healthy Bank” banker.
Like most actions in life, the people who made mistakes should be held responsible. Short term, may be the gov’t should help, but long term ALL persons involved should have to pay a BIG penalty.
Every time a large bank gobbles up a smaller one, they justify their action by chanting an economies-of-scale mantra claiming that a larger financial institution (Bank) can better serve the American public and businesses, but, as we are tragically witnessing, all these claims are quite apocryphal. All these large banks and their all too frequently unprincipled executives want is to dominate their markets and line their pockets in the processes. Then, when these “brilliant” bankers run into trouble generated by their own greed, they run to the government to bail themselves out, so my answer to your question is: No! Solid banks should not have to help fund the bailout of mismanaged ones. Instead, I suggest part of the answer look to the CPA firms – Remember “good old” Arthur Anderson and that firm’s propensity for abuse? – and hold them accountable for their audits. Also, it would be a good idea to conduct an electron microscope review of the bank examiners who allowed these banking problems to go unnoticed before they became a catastrophe. Finally, let’s not forget that, while the banking crisis was developing, congress sat on its hands and did nothing to stop it exhibiting the most abject incompetence imaginable. With respect to our irresponsible politicians Lee Iaccoca has weighed in suggestion that a good first step would be to never vote for an incumbent and never vote for a lawyer. I’m increasingly inclined to think Mr. Iaccoca’s is right.
This is what is known as “share the wealth” (or as Churchill put it, “share the misery”