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Living Through Troubled Times

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Curt Hecker talks about the economy Curt Hecker talks about the economy

Panhandle State Bank's Curt Hecker reaches out to a concerned community to explain these current economic times

Are you worried about your money? Most folks are these days as the national headlines fill with the news of failures in the financial sector, massive taxpayer bailouts, mortgage foreclosures, a manic/depressive stock market, shrinking retirement accounts and grim comparisons to the Great Depression.

Curt Hecker, the President and CEO of Intermountain Bank Corp.—the governing entity for Panhandle State Bank—decided to take a pro-active approach to local concerns with a series of Town Hall meetings, where he spoke one-on-one with local business owners, depositors and stockholders of the bank about the current financial crisis and what it means in our local area.

"Although it’s not official, I would say we’re in a recession," he told an afternoon group in Sandpoint. "So we’ve been traveling and talking about what’s going on. I’m not selling you anything, just offering some straight talk.

"We are in troubled times," Hecker says. "You’ve heard many CEOs say ‘our bank is safe and sound.’ Yes, our bank is safe and sound but things can happen that you and I can’t foresee. It’s important to look at contingency plans to ensure long-term stability and safety regardless of outside influences." He added, "We are a great company and we do a good job of running our business. We have no control over bad luck—or over good luck, for that matter. Our institution is purely a product of our local community."

As background, he offered an explanation for the financial situation we find ourselves in not just as a nation, but internationally as well. "We’ve gotten a little bit off the rails (as far as) staying within our means as a country. Profligate borrowing has led to staggering international debt."

Hecker explains it all started five to ten years ago, when times were good and it seemed the sky was the limit. Everyone wanted to get in on the boom, and home ownership has long been a symbol of achieving the American dream. We began to believe that everyone could own a home—and mortgages began to reflect that; mortgages that Mara Der Hovanesian, writing for "Business Week" back in 2006, called "Nightmare Mortgages." Homeowners who couldn’t pay those mortgages began to default, which created the beginning of a domino collapse of financial entities.

"We were shocked to learn that we have firms that are just too big (to be allowed) to fail," said Hecker. "It is a concern for me that we have companies so large that the taxpayers have to step in to bail them out."

"Clearly what is different now is we’re more globally interconnected," offered IMBC CFO Doug Wright. "The international financial system depends on the flow of money back and forth, which places a heavy demand upon availability of credit. Some of that is useful—it does help grease the wheels of the economy—but it’s probably gone overboard. The whole world has realized we’ve gone too far.

"People must bear in mind that the (government) bailout is only a short-term fix. In the longer term, it is probably a two- to three-year cycle before we will see a substantial recovery. There are a lot of excesses to work out. That’s healthy for the long term, but in the short run, it will be painful."

Following is a partial list of questions and answers that arose in the Town Hall meeting.

Q. If I have more than $250,000 in the bank, do I need to split my accounts up among different banks?

A. No. We have set up specialists in all our banks to work with customers on an individual basis to determine how to keep their money safe. There are many ways we can structure your accounts so they are fully insured. In addition, all non-interest bearing accounts are insured to unlimited amounts.

Q. Nationally, banks are becoming much tighter in terms of credit. Will that have an impact on our local businesses?

A. As far as we’re concerned, we put 100 percent of our dollars back into our community. We are still working with our existing customers. That’s the big difference between a big bank and a small bank—we know our customers and can make good judgments about appropriate levels of risk according to that knowledge.

Q. What’s happening in our local housing market?

A. We still have a substantial overhang in the number of homes on the market. It’s hard for contractors to get loans on new construction. The other major constraining factor is availability of credit. Right now, it’s tougher for people to qualify (for a mortgage). If you look at this situation as if it were a 9-inning ball game, we’re probably in the middle.

Q. Will Panhandle State Bank be acquired by another bank?

A. Our intent is to be a growth company, not an acquisition for another financial institution. Generally, if a business doesn’t want to be acquired, then it’s very difficult for that to happen.

Q. Has concern over the economy led your customers to take their money out of the bank?

A. We have seen next to no significant activity in that way. I think that’s because we’ve done a good job of talking to our customers and explaining our current status and future plans. We have developed a lot of trust within our banking community, and that goes two ways.

Q. Given the bailout, will finances get worse or get better?

A. It’s not going to be easy, but our government has had some tough decisions to make in a short period of time and it seems to be working. Now we need to move forward and work our way out of this.

Q. How will taxpayers manage to pay for this bailout?

A. The plan that was put in place allows for the bailout to pay for itself. For example, the government takes an ownership share in banks that participate in the bailout, and they keep that ownership share until the bank pays back what it was given. If they pay back within the first five years, they pay 5 percent. After that, banks pay 9 percent interest on the money they borrowed. Another part of the bailout is buying these failing mortgages—at a highly discounted price. There’s a reasonable chance of getting those assets at such a discount that we’ll come out whole. Where the direct equity infusion is concerned, that’s a less certain outcome. You can’t control for every risk out there, but the government is not just giving this money away. FDIC insurance premiums are paid by the banks, and if there are payouts from that pool, and the fund drops, the banks will pay more. The economic stimulus methods (checks to taxpayers) will not be repaid directly, and will therefore add to the debt.

Q. Is what’s happening now comparable to the Great Depression?

A. Not really. From an academic standpoint, this recession is fascinating. What’s happening now is on a global scale, not just a U.S. scale. There are a lot of different factors in play. For example, FDIC insurance was created after the events of 1929 and that provides a tremendous safety net to protect today’s depositors. We have moved from a cyclical manufacturing economy to a more stable, service-oriented economy. Farming is no longer a major employer, so the country is not as susceptible to massive unemployment from that sector as occurred during the droughts of the 1930s. Trade laws during the Depression very quite restrictive, and today we live in a true global marketplace. Today, governments have many more options for addressing our current economic situation. While this is not a perfect world, it has become a very different one over the past 80 years. We can learn from history, but we don’t have to relive it.

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Landon Otis

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money, bailout, Curt Hecker, Intermountain Bank Corp, Panhandle State Bank, recession

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