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Future may mean consolidation, industry officials say

Metro Jackson banks feeling effects of soft economy

JACKSON — Strong competition and rate-sensitive customers seem to be the hallmark in today’s banking industry in metro Jackson, according to several industry officials, but changes in the state could turn the economy around.

Donna Sims, president of the Madison-Ridgeland BankPlus offices, said the adjustment of the rates she saw at the first of the year have made loan customers happy, but deposit customers unhappy.

“You get rate-sensitive people from both sides,” she said. “A lot of times you have to make sure you don’t take it personally because they are so sensitive.”

Those on fixed incomes, Sims said, are dependent on investment earnings and for that reason may be more sensitive than others may when it comes to rate changes. Those in the construction business may be feeling the effects of rough times in the economy as well, as some spec houses have had to sit a while on the market and higher rates have kept some people from buying homes as of late.

Sims said now that rates are coming down some, people have begun to buy homes. But builders are still losing money on their investments because of the length of time they’ve held onto their homes.

Young people too are having a hard time paying off credit card bills because of the economy, and that coupled with rate increases have made it hard for some to meet their monthly obligations, Sims said.

“It’s been tough on a lot of people to try to meet their monthly obligations,” she said. “The recent decline in rates is favorable for all of us in that respect.”

BankPlus has been hardest hit by the economic downturn because of the recent high rates, according to Sims. But business is still good in metro Jackson.

“We’ve held our own,” she said. “But I think if we’d come to the area this time last year we wouldn’t have been as effective because rates were high. I don’t think it’s impacted us negatively because we started out in a low interest-rate environment.”

BankPlus isn’t experiencing any past-due problems, Sims said. And now that rates have slacked off, she hopes to see people land on their feet.

Stan Pratt, Jackson area president of AmSouth Bank, said typically in a slowdown one would see a slowing of growth or no growth or declines in all types of loans and deposits. But the only slowdown AmSouth has seen has been in the commercial business area. Consumer loans and deposits continue to grow and be strong.

“Typically you’ll have a slowdown in consumer spending which leads to a commercial slowdown, but this time we’ve not seen that except on the commercial side,” Pratt said.

Home equity, mortgage and lending have been strong for AmSouth, and there have been good deposits on the consumer lending part of the bank.

“Because sales are down, levels of accounts receivable are down and so are levels of borrowing from the bank,” Pratt said.

AmSouth hasn’t been hit hard by the economic downturn, and most of the people Pratt has talked to feel the worst of the slowdown is behind them.

Pratt is optimistic business will pick up in the third and fourth quarters and he’s seeing more optimism now but hasn’t noticed an increased loan demand.

“Other than that we’re very active in promoting our home equity lending products and have had good success with that,” he said. “Consumers like the product, demand is high and we’re having good growth in that.”

Zach Wasson, executive vice president and chief financial officer of Trustmark Corporation, could only address its own situation. He said despite the economic slowdown, Trustmark in 2000 reported the most successful year in its history.

“This was not accomplished by chance but through management’s strategic planning and our associates’ hard work as we transition from a traditional bank to a financial services organization providing banking, investment and insurance solutions,” he said.

And as far as where the bank has been hardest hit by the downturn, Wasson said the bank has seen a decrease in consumer and automobile lending. In light of a declining Consumer Confidence Index that fell for five straight months from late 2000 until April 2001, though, it wasn’t a surprise.

“On the other hand, Trustmark has experienced very strong deposit growth in both demand accounts and certificates of deposit,” he said. “We also continue to see commercial lending and mortgage lending growth, and those segments should continue to increase with the recent interest rate cuts.”

Trustmark has managed to make it through the hard times by providing services that best match their customers needs. For example: the formation of their Trustmark Business Banking Group. The corporation has 35 business bankers dedicated to providing banking, investment and insurance solutions to businesses with annual sales of up to $3 million — a market segment recognized as a significant part of the state’s economy. And the results have been outstanding for Trustmark with more than $110 million in new loans and 1,500 new business checking accounts during 2000.

“Trustmark traditionally has striven to maintain a diverse commercial loan portfolio not weighed heavily in any one sector,” Wasson said. “A diversified base helps weather any economic downturns.”

Curt Gabardi, president of Union Planters in Jackson, said Jackson is generally immune to the national economy.

“The challenge will be not to veer from long-term management practices in any regard for short term gain,” he said. “I think that’s been the greatest challenge is not to lose sight of long term management practices.”

Competition in metro Jackson among banks has been and remains strong, but Gabardi believes consolidation among banks is inevitable, less for pure economic reasons and more for what makes sense for the customer.

“It can’t be at the customer’s expense,” he said.

Gabardi believes competition is good for everyone, but not at the expense of the long-term health and viability of the banking industry’s performance as a whole.

“Loyalty is razor thin and customers chase the good terms,” he said. “Fortunately we haven’t missed any deal or relationship because of those kinds of tactics that didn’t make sense.”

Pratt believes the metro Jackson area will continue to be a banking hotspot in the future and that more banks will continue to enter the area until the market is well saturated.

Sims agreed that competition will become even stronger in the future.

“I think the competition is going to drive what we do,” she said. “We have some new banks that have come to the area and that’s all part of it. It used to be that a banker would sit behind their desk and take orders all day long, but that doesn’t get it anymore.”

And it isn’t just with banks that banks are competing, Sims said.

Insurance and brokerage companies have become a part of the competition as well. And, she added, because of the heavy regulation banks faced as opposed to the amount of regulation that places like brokerage firms have, it is sometimes hard to compete with those people.

Sims said it is through customer service that BankPlus is able to compete.

“Our decisions are made locally and that’s what people want — especially people in Mississippi,” she said. “They want personal service. Even though we might be challenged in some areas that’s definitely a plus for us.”

As for a turnaround in the economy, Wasson believes the stock markets and interest rate markets are implying that the economy should pick up later this year and the performance of these markets in recent months have been e
ncou
raging. The Federal Reserve has lowered the overnight federal funds rate by 250 basis points and the banks have also lowered the prime-lending rate by 250 basis points. Traditionally such steps have led to a positive impact on the economy.

“Trustmark is changing to meet our customers’ needs and offer a broad range of banking,

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