A two-time former Cobb Chamber of Commerce chair who now serves in a leadership role for Synovus Financial Corp. said things are getting better for the banking industry after an almost six-year downward spiral.
Kessel Stelling, a 30-year Cobb Chamber member who served two terms as chair in 1998 and 2006, addressed a crowd of about 370 Monday during the Chamber’s monthly breakfast meeting.
The 57-year-old moved away from Cobb in 2010 after accepting a position as the president and chief operating officer with Synovus Financial in Columbus.
“My heart and home are still in Cobb,” he said. “It’s a pleasure to be here with an organization I care about.”
Stelling was asked what makes a great leader in recognition of the Chamber’s 2013 Leadership Cobb class, but he also talked about where the banking business is today after struggling through the epic financial crisis that began in September 2008.
Dozens of insolvent banks were seized by federal regulators in late 2008, and the seizures didn’t really start to slow down until 2011.
“The headlines for our industry have been pretty bad for the last three, five or six years and even as there are challenges remaining, I think there are some great days ahead,” he said.
Stelling, who studied banking finance in college and has been in the business for 37 years, said in his almost four decades in finance, 33 of them have been a “blast” with the last few being the toughest.
His company, which runs banks in 100 cities in five states, including Georgia, Florida, South Carolina, Alabama and Tennessee, and has total assets of $26.2 billion throughout the Southeast alone had to let go of 2,500 employees.
“In this crisis, a lot of bad things happened to a lot of really good people,” Stelling said. “It’s been a tough, tough cycle. A lot of businesses held on as long as they could but the conditions were just too hard and certainly people took on too much risk and too much debt and bankers played their parts well.”
He said he doesn’t believe anyone borrowed money they didn’t think they could repay, nor did banks loan money they thought wouldn’t be repaid.
“The sooner we all come to grips with that and begin to re-establish those bonds of trust that have served us so well, the quicker we will ultimately get through this whole problem,” he told the audience.
Light at the end of the tunnel
“There is good news too for our industry, a positive momentum … which means good things for our people,” Stelling said.
According to the Quarterly Banking Report from the Federal Deposit Insurance Corp. issued May 29, the number of banks on the FDIC’s problem list declined to 612 in the first quarter of 2013, compared to 651 at the end of 2012. It was the eighth straight quarterly decline.
Only four insured institutions failed during that same time period and that’s the lowest since the second quarter of 2008.
This year so far, only 13 banks have failed, compared to 24 banks over the same period last year.
And the deposit insurance fund balance rose to $35.7 billion, up from $33 billion at the end of 2012.
“In summary, asset quality continues to improve, more institutions are profitable and the number of problems and failures continues to decline,” the report states. “However, industry revenue remains flat, primarily due to lower net interest margins and slow growth, low portfolios and tighter margins. Nonetheless, these results show overall that the process for recovering continues for the banking industry.”
Good news for everyone
When the banking sector gains strength, it’s good news for everybody, Stelling said.
“It’s about helping people buy homes, sending children to college, starting their small business, making an acquisition or taking a vacation,” he said. “Strong banks make strong communities and so does strong leadership.”
Don Sabbarese, a Kennesaw State University professor who specializes in financial institutions and macroeconomics, agreed with Stelling’s analysis of the banking bounce back.
“2012 was certainly an improvement and 2013 will definitely be a better year for the Georgia banks,” he said Tuesday. “I think banks now are getting to a point where they are able to do their business, make new loans and that’s really what they need to be doing.”
Sabbarese also said the number of returns on assets for Georgia banks are starting to look a lot better than they have in the recent past.
“But the only thing is you’ve lost a lot of community banks in the state of Georgia,” he said.
There are many of them that are still struggling and a little more than 80 community banks closed as a result of the crisis.
“In terms of lending, banks are still going to have to be very cautious in making loans because of where we’ve been in the last five years,” he said. “I think their credit standards are going to have to remain pretty high still, so even though we’re seeing loan growth, they are going to have to err on the side of being cautious.”
As for students who are attending KSU in hopes to go into banking, Sabbarese couldn’t say if that number has dropped since 2008, but pointed out that, like any industry, there will be retirements and banks will need to hire people to replace them.
“My suspicion is that there’s not a tremendous amount of opportunities but if they could get into the banking sector, there could be some good opportunities going forward,” he said.