Main St. or Wall St.

Many of the headlines for the past few weeks have dealt with problems at banks, especially after the failure at IndyMac Bank in Pasadena, CA and the near meltdown of Fannie Mae and Freddie Mac. There is a growing concern on Wall Street that there is not enough liquidity at the banks, capital ratios are too low and problem loans are growing. And, if you look at the stock prices of most major banks, it would scare you to death! Most of the major banks are selling at five and ten year lows, with several at major discounts to book value. The market is scared!

From my perspective in rural America the problems that Wall Street is concerned about are just that….Wall Street concerns. The view from Main Street is something completely different.

I see it first hand from my role as Chairman of our Midland States Bank board, a local community focused bank, in Effingham, IL Unlike the major money market banks that often run their operations with paper thin capital of 3 to 5%, our bank and most other local banks have two and three times that amount of capital. It’s called running a conservative, make-no-mistakes approach to banking as opposed to one that is driven by quarterly earnings and “what is my stock price today?”

Today, our bank is as solid as ever. Delinquent loans are down from years past, our total capital is at a record level, our stock price has never been higher, we’ve increased our dividends by at least 10% each year for the past ten years, and our customers are making money and requiring more capital to expand. And, our bank is not unique. It is the same message that I hear in talking with bankers in Ripley, MS; Scottsboro, AL; Camden, SC; Dodge City, KS; Columbus, MS and many other rural towns.

I stressed it in my book and am more convinced with each passing day as I travel around the USA… local banks are key to a town’s development. While they might be run very conservatively from a fiscal standpoint, they are providing the capital fuel that keeps local communities humming. Support your local banker!