Despite record earnings and capital levels, community bankers are tightening their belts for leaner times.
Many see increasing competititon, the dwindling number of mortgage refinancings, and narrower margins translating into lower profits.
"They are trying to squeeze as tight as possible," said Thad Woodard, president of the North Carolina Alliance of Community Financial Institutions. "Those who are talking about cutting costs, or watching every dime will be around for the next peak."
Defensive Posture
Banks are generally running scared," added William Ferguson, president and chief executive of Ferguson & Co., an Irving, Tex.-based bank consulting firm. "They are still going through the process of strictly scrutinizing every expenditure."
Jimmy Faulkner, president and chief executive of Century South banks Inc., Dahlonega, Ga., said Century South's budget calls for a 25% increase over 1993. But to control costs, the company has outsourced its data processing operations and hired a consulting firm to make recommendations on further cost-cutting measures.
"The time to look seriously at your operations is when things are improving," Mr. Faulkner said. "You can take a more realistic look. When you do these kinds of things you should use a scalpel, not a meat ax."
Earnings Rise 8.25%
The $434 million-asset banking company earned $2.9 million for the three months ended Sept. 30, an 8.25% increase from a year ago.
Mr. Faulkner said the lessons of the the recent past, when loans collateralized by real estate soured, are still fresh in his mind. So he's determined to keep a lid on costs while times are still good.
"We just got lulled to sleep with so many good years," he said. "We let ourselves get fat, dumb, and happy."
Elliott Carr, president of Cape Cod Five Cents Savings Bank has no plans to squeeze the budget.
"It's almost too tough to tighten things up," he said.
Business Is Booming
He said employees want raises, and customers are demanding lower rates on loans because Cape Cod Five has been flooded with profits.
In fact, business has never been better for the $520 million-asset savings bank. For the first nine months of the year, Cape Cod Five earned $6.5 million, compared with $2.68 million a year earlier. Earnings were fueled by a tax break, recoveries, and the home refinancing boom.
|"We think it [1994] will be a good year," he said, "but it will look pretty bad from, 1993."
