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Loans still doable in Southern Illinois

By Becky Malkovich, The Southern

Saturday, October 4, 2008 11:29 PM CDT

Think you can't get a loan for that new car or house?

Don't bank on it, local bankers say.

While the subprime lending crisis may be affecting the generosity of some banks when it comes to making loans, local banks are ready, willing and able to cut loan checks for eligible customers.

Subprime lending refers to the practice of giving credit to borrowers who may have less-than-ideal credit or those with a higher risk of default.

"The impact locally is not nearly as bad as it is nationally," Peoples National Bank President Bill Bonan II said.

"Southern Illinois never had too much of the type of subprime lending that got places like California and Florida in trouble. We still have good activity at the local bank level."

Bonan said local banks invest more money in commercial real estate, another area where Southern Illinois has been insulated from problems affecting the national economy.

"We never had the upswing that other places had," he said. "We've been pretty level for about 15 years."

Mel Bower, Banterra Bank director of marketing, said the bank's branches are not empty of customers requesting loans.

"We haven't necessarily seen any change in the number of people coming in for loans. There is always a seasonal ebb and flow, and we are not seeing anything uncharacteristic of this time of year," Bower said. "I don't know that this region has as yet seen any negative impacts that other parts of the country have seen."

In fact, he said, Banterra is on track to have a record year.

"We've done very well by using conservative and sound underwriting. We've been consistent with those practices and that's one reason we are not being affected by things like the subprime mess."

Bank of Carbondale President Bob Bleyer said the pace of consumer lending may have slowed down slightly, but that has more to do with customers nervous about the economy than it does with the local banking industry.

"Our credit underwriting standard has tightened a little, yes, but it always gets looser and tighter with the national economic conditions," Bleyer said.

"But I doubt we will see any local banks or borrowers affected by the subprime crisis because that type of lending just really doesn't exist here. And people should know that every bank I know of in Southern Illinois is very safe. They should have no fear about the banks in this region."

Bonan said he is concerned that the national crisis will eventually affect the local banking industry and its customers.

"I believe it is going to be tougher to borrow in the future as a result of what is going on nationally. I think the government will tighten regulations for all banks, not just those having trouble," he said.

The belt-tightening regulations may include higher credit scores and larger down payments for borrowers, he said.

"People who need to take out loans and who have good credit are probably okay for the time-being," Sue Hofer of the Illinois Department of Financial and Professional Regulation said.

"But it is a time for folks to consider if what they want is really what they need. These are tough times. Unemployment figures are out and they are higher than they were last month. Even if you think your job is secure, with a national economy like this, now is not the time to spend more than you can afford."

She also warned against taking out payday, title or other short-term loans.

"The interest rates on some of those loans are 400 percent-plus," she said. "You are borrowing at a very expensive rate."

Hofer said consumers might benefit from making short-, medium and long-term financial planning. The IDFPR has a Financial Literacy 101 link on its Web site that can help consumers with such planning, she said.

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