Banks in state report stability

BY DENNIS SEID

TUPELO - Ken Cyree had plenty to do Monday, but couldn't peel himself from watching the mayhem on Wall Street.

Cyree, the interim dean of the University of Mississippi School of Business and holder of the Mississippi Bankers Association Chair of Banking, was surprised at the financial meltdown he was witnessing.

"I'm in shock," he said Monday morning. He wasn't the only one.

By the end of the day, the Dow had dropped more than 500 points as investors reacted negatively to the bankruptcy filing of Lehman Brothers Holdings Inc. and the forced sale of Merrill Lynch to Bank of America.

"What can you say?" he said. "Look at what's happened to the Big Five on Wall Street. You had Bear Stearns a few months back, Lehman Brothers files for bankruptcy, Merrill Lynch is bought by Bank of America, J.P. Morgan was already bought by Chase ... Goldman Sachs is the only one who hasn't been affected as much.

"The point is, you don't make great returns for free, not with the amount of risk that's involved."

Financial companies made huge bets during the housing bubble, which burst a little more than a year ago. The subprime market yielded good returns -until reality hit. Since then, falling real estate values, rising foreclosures and a tightening credit market have squeezed those financial institutions to the point where we are today: Billions of dollars lost and thousands of people without jobs and homes.

But bank customers in Mississippi need not worry about the liquidity and financial strength of their banks, Cyree said.

"In general, banks in Mississippi are in good shape," he said.

One reason is that the real estate market in the state is stable. Another reason is that banks haven't participated in the subprime debacle that has claimed other banks and other financial firms across the country.

Aubrey Patterson, chairman and CEO of Tupelo-based BancorpSouth, said larger regional banks and community banks in the area have refrained from those risky investments.

"All the problems have roots in the subprime and real estate bubble," he said. "The presumption was that people would continue to make money; it was a contagion. By contrast, BancorpSouth, for example, has assets of $13.4 billion, and we only had $300,000 in subprime debt, which essentially is none."

Regional banks and community banks don't take the big risks that larger banks take and are more regulated, Patterson added.

"There is a distinction between Wall Street and Main Street," he said.

Robin McGraw, chairman and CEO of Tupelo-based Renasant Bank also added assurance, saying, "Although no one is immune to the credit crisis and what is happening within the national financial markets, banking consumers should know that, through the FDIC, their deposits are protected up to certain amounts ... Renasant, as with all FDIC-insured banks, is regularly and thoroughly examined by state and/or federal regulators who focus on institutional performance, soundness and risk management."