'Credit crunch' hits close to home

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November 9, 2008

Banks more careful when lending

By BRUCE ROWLAND The Press Republican Sun Nov 09, 2008, 05:19 AM EST

PLATTSBURGH -- Local businesses are experiencing slower traffic and, in some cases, a more difficult time getting customers approved for loans.

But, as is often true in the North Country with economic trends, the "credit crunch" caused by the crisis in the financial industry isn't as bad here as it is nationwide.

"It's definitely slowed it down," said Tim Parker, co-owner and general manager at Parker Chevrolet-Pontiac Inc. in Champlain. He said lending institutions, especially national ones such as the GMAC funding source for GM cars, have been affected.

Higher down payments are being required, credit scores have to be higher and maximum amounts that can be financed are being enforced.

Parker said his business is taking it one day at a time, trying to sell what it can, taking care of its customers and waiting for the challenging economic times to pass. "There's not much you can do about it," he said. "Just sit and wait it out."

One popular financing option is just about off the table entirely. "Basically, there is no lease for GM right now," Parker said.

Nathan Smith, sales manager at Garvey Hyundai on Tom Miller Road, said banks are being a little more selective and being more specific about what a new or used car is worth, but are still making deals. "From a buyer's point of view, they're actually looking out for your best interests," he said, explaining that they want to be sure customers can afford their cars and make their payments.

The worst thing that auto dealers are concerned with, he said, is that customers will assume they can't get loans and won't come in at all. "But that's certainly not the case," Smith said, adding that banks have gotten an infusion of cash from the government to make loans with and want to use it. "But they just want to do it right," he said.

Dealing with the psychology of the economic downturn can be daunting for car dealers. "People hear all the doom and gloom and regardless of the situation they start holding onto their money," Smith said.

He noted that it's a strategy that is not an option for businesses because companies can't just stand pat. The operational expenses go on no matter what.

The economic downturn has compounded a bad time of year for the car industry, he said, as the time around Thanksgiving at the beginning of winter is traditionally slow. But he hopes that won't discourage consumers. "We have 19 banks that want your business," he said. "Financing is available."

Both Smith and Parker said they are hopeful about the future, but they think there's still a ways to go.

The financial crisis began in the housing market and many people are overextended, so it will take a while for things to get back into balance, Smith said. When that happens, though, banks will be making the kind of loans they should have been making all along based on sound lending practices, consumers will be buying what they can afford, and things should get better.

At Ashley Furniture at 84 Margaret St., sales people are taking extra precautions to be sure credit applications are complete and filled out properly, but they haven't seen too much of an impact on customers from the economic downturn.

"We haven't really experienced that in furniture financing," co-owner Howard Pirofsky said. "The credit companies we use haven't been giving us any difficulty. We haven't had any repercussions in getting people approved as long as their credit is reasonably good."

However, he said, the credit market has really tightened up for commercial loans that businesses use for operational expenses. "Through our industry, that is definitely a factor," he said.

While the local store hasn't needed this kind of lending, Pirofsky said, in some areas of the country that have been hit hard by the crisis, things are very, very different. "We're constantly hearing how bad it is," he said.

Customer traffic at the store is not as robust as it could be, and Pirofsky says he believes it's because people have been scared by all the political turmoil and negative publicity. "There are some good things," he said. "There's not all bad."

For their part, area banks and credit unions in the North Country say they have always engaged in sound lending practices and things haven't changed that much here because of the economic crisis.

"The main thing, being a credit union, this has not affected us," said Linda Bourgeois, CEO of UFirst Federal Credit Union on Rugar Street. "We've always followed a fairly conservative lending policy set by our board of directors."

She said the amount of money available to loan hasn't changed, nor has the liquidity of the institution. Loan officers always carefully check employment history and debt-to-income ratios to be sure customers can afford their payments.

"I think, for the lenders not lending in a conservative manner, they are shifting back to the way they used to be," she said.

One thing has had an impact in a positive way. The legislation created by the Emergency Economic Stability Act passed recently by Congress and signed by the president temporarily raised the amount of insurance on savings by depositors from $100,000 to $250,000. The National Credit Union Share Insurance Fund, the credit union equivalent of the Federal Deposit Insurance Corp., is covered by this just like the FDIC.

"That's good until Dec. 31 of 2009," said Bourgeois, who is president of the Adirondack Chapter of New York State Credit Unions.

"Our credit unions are business as usual," she said. "We're a safe harbor in this storm."

Nick Scors, CEO of Dannemora Federal Credit Union on Tom Miller Road, agreed.

"The credit crunch really hasn't affected us much," he said. "We were never involved in subprime mortgages. We weren't involved in those derivatives and we weren't invested in Lehman Brothers or the other big boys."

He said they are happy to meet with anyone looking to borrow. "We have a lot of liquidity and are putting out loans as usual," he said.

Representatives of local banks also say they are well capitalized and ready to make loans. They say their landing standards have been solid from the beginning, so they haven't had to change their practices much.

"There's been no change in our underwriting standards," said Tim Badger, senior vice president and director of marketing for Glens Falls National Bank, which does business in five upstate counties and has offices in Plattsburgh. "Nobody is immune to overall what happens in the U.S., but it's business as usual for us."

He said Plattsburgh is a good market, and loan demand has been solid for the first three quarters of the year. "What I would say, the mortgage market is a local market," he said. "It's not a nationwide market that has been hit quite badly."

His competitors are lending money, too, he added. "I don't know of any community bank in New York State that's doing anything differently."

KeyBank, with numerous offices throughout the North Country region, is one of 20 banks that as of last week had received TARP, Troubled Asset Relief Program, funds from the federal government as part of the Emergency Economic Stability Act.

"This is probably in my view a Good Housekeeping Seal of Approval," said Steve Fournier, president of the Central New York District of KeyBank. He said this means the federal government sees the bank as a well-run institution that is capable of lending even more money to make the economy stronger.

The funding will be used to make new loans and invest in current business.

Fournier said the bank has always been a prudent lender and has beefed up its presence and loan capabilities in the North Country, where loan volume has remained constant.

"The commitment to the loan side up there has never been stronger," he said.