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Banker: Recovery will take years
Carter Bank & Trust annual meeting held Wednesday
Worth H. Carter Jr.
Thursday, June 30, 2011
By GINNY WRAY - Bulletin Staff Writer
The nation's recession was deeper than most people thought, and recovery will take longer than people expected, according to Worth H. Carter Jr.
Carter, board chairman and president of Carter Bank & Trust, made those comments during the bank's annual meeting Wednesday.
"It was like the whole country got on steroids," he said of the years before 2007-08 when money was loaned easily and credit standards often were abandoned.
Except at Carter Bank. There, Carter said, "the bank did not participate in any of the things that created the problems" the economy has gone through. It did not change the credit standards that had served it well for the previous 30 to 35 years, and it avoided a lot of the problems other banks have experienced, he said.
As a result, Carter Bank has continued to make money during the recession and recovery, Carter said. For fiscal 2010, net loans increased $30 million, and its net loan losses were $353,000, compared with $590,000 in 2009, according to its annual report.
"This is an extremely low level considering the economic conditions and our outstanding loan volume of $1.803 billion," it added.
Deposits increased $302 million over the prior year, the report stated. It added that the increase occurred in all deposit categories.
While Carter is anticipating another good year for 2011, he said there is less demand for loans, and the quality of the requests has declined. For instance, he said, applicants may have existing debt or be unable to pay off a loan.
More customers are having financial problems than occurred two or three years ago, he said, as people's savings and businesses' reserves have been depleted. At the same time, they are dealing with rising costs of food, gas and other essentials.
"These are good people" who are trying to cope, Carter said. "We bend over backwards" to work with them.
Carter Bank operates in communities that have been in a recession for 10 to 15 years due to the declines and losses of textiles, furniture and other industries, he said. Martinsville continues to have the highest unemployment in the state, he added.
"We are in long-term recovery," he said, adding that it may be "several more years before we're anywhere close to normalcy."
At the national level, Carter said many banks are returning to the credit standards and practices they should have maintained in the first place. But he complained that regulations such as the Dodd-Frank bill penalize all banks, instead of just making changes at banks that caused the economic problems.
"The pendulum has swung too far" to over-regulation, he said.
He estimated he spends 75 to 90 percent of his time on regulations and the rest on ensuring the "safety and soundness" of Carter Bank and its operations. Instead, Carter said, he should be spending most of his time on growing the bank and the community.
He also criticized Congress for failing to act on Fannie Mae and Freddie Mac, two taxpayer-backed agencies that helped foster the idea that anyone could own a home, whether they could afford it or not, Carter said.
Traditionally, the housing market has led the nation out of downturns, but that is not the case now, he said. As a result, this recovery "won't look like any in the past. We'll get back, but it will take years, not months."�
Carter said Congress has no choice but to raise the debt ceiling, but it also must do something to "significantly slow spending." Also, he said after the meeting, the nation's tax code should be scrapped and a new code should be written that might have fewer deductions but lower rates.
So far this year, 48 banks have closed nationwide, compared with 84 at this point last year, Carter said, predicting that rate will continue to slow.
He said that helps existing banks because when a bank closes, it is a drain on the Federal Deposit Insurance Corp. (FDIC), which is funded by assessments on the nation's banks.