So just how bad will things get for Nashville’s banks?
Posted on July 23, 2009 at 6:47 am
Wednesday’s Pinnacle Financial earnings conference call ended on a chilling note when Stephens Inc. analyst Matt Olney asked CEO Terry Turner to compare his bank’s bad-loan levels with those of competitors in Nashville.
“My belief is that our credit quality is better,” Turner said. “Other operators in this market have been taking significant losses over an extended period of time… We’re later getting to the table.”
That’s pretty strong stuff when you consider that Pinnacle’s nonperforming asset ratio ballooned to 3.3 percent in the first half and is quite a bit higher than most Nashville-area banks’. (Generally, bankers start to get nervous when their NPAs approach 2 percent. For the parent of GreenBank, the number now stands at almost 5 percent.)
But if Turner’s right, it means many of his Middle Tennessee peers — who were much more aggressive than Pinnacle in pursuing land development deals during the boom — still aren’t owning up to many of their credit problems.
And Turner isn’t upbeat about the region’s real estate sector. Asked what he’s hearing from the trenches, he was blunt.
“In the case of real estate, the sentiment would be awful. You wouldn’t find any optimism among builders, among developers, among folks that loan to them,” he said. “There’s some activity, but you couldn’t translate that into optimism.”
Banks around the country that relied on lending to homebuilders are now gasping for air. And, while we don’t really want to admit it, parts of Greater Nashville look a good bit like parts of Greater Atlanta, where a fistful of banks have gone under this year. Given a little more time, why should our situation be all that different?
Without getting too dramatic, it’s time to start preparing for the first Middle Tennessee bank failure of this crisis. One Friday afternoon soon, the friendly folks at the FDIC will unveil their first Tennessee intervention, adding to a 2009 list that now stands at 57.
And oh, by the way, in case you had the thought: Don’t look for Pinnacle to be a buyer when that happens. Turner on Wednesday told analysts his team is “not particularly interested in FDIC workouts.” That’s not terrible surprising, since he also said most of his crew’s current credit quality troubles stem from the acquisitions of Cavalry Banking and Mid-America Bancshares.
