The Stories that Shaped 2009 No. 2: Businesses, banks lock horns over lending

It was a tense year for business owners and the bankers who fuel their companies.

The nationwide economic recession and the frozen global credit markets drove businesses and banks to spar at times, and the most vocal of the businesspeople were those who sought to feed company growth only to hit financial dead ends.

Frustrations boiled over in February, when area bankers were dealing out more restrictive federal underwriting standards and higher interest rates. That left otherwise good-standing customers - such as developer Sam Coryell of TLC Properties - out in the cold.

"I don't doubt that (banks are) still making loans, but they're not making loans to people that create jobs," Coryell said after receiving unfavorable terms from his longtime lender, Great Southern Bank, to finance a $10 million apartment complex. "I'm no big player ... but I do create and sustain a lot of jobs."

The key phrases became "well capitalized" and "low-risk borrower."

"I think they've gone to the mattresses," Guildmaster CEO Steve Crowder said early in the year about the tightened lending practices. "Let's not kill the small businesses during this readjustment period, because long-term, this is the engine that drives ... the Springfield economy."

Banks were caught in the middle.

"You don't underwrite loans in a vacuum," was the response of Great Southern President and CEO Joe Turner. "You underwrite loans fully cognizant of the economic circumstances. ... Does this particular customer have the wind at their back or are they going into a headwind? And if they're going into a headwind, you have to make sure there are other factors which compensate for that risk."

The federal government tried to step in and help. Dollars from the $700 billion bailout - formally known as the Troubled Asset Relief Program, or TARP - that Congress approved in October 2008, began trickling into the Ozarks.

Guaranty Bank, Great Southern and Liberty Bank were among the local banks that sold shares of preferred stock and warrants to the federal government through the U.S. Treasury's Capital Purchase Program, a component of TARP.

Critics around the country said the federal bailout money hardly made its way to small and midsize businesses.

And then there was Mariner Kemper. The chairman and CEO of Kansas City-based UMB Financial Corp. is a self-described "raging capitalist," who while in Springfield on a speaking engagement told Springfield Business Journal he thought the Federal Reserve was misguided in its response to the country's financial meltdown.

"We should be lending less as an industry," he said in July. "You can't solve leverage with leverage."

Proponents said the government cash injection was necessary to avoid a collapse of the U.S. financial system. The program worked well for those banks interested in acquiring troubled banks.

Great Southern assumed the deposits of Kansas-based TeamBank and Iowa-based Vantus Bank, two of the 133 institutions that had failed as of Dec. 11, according to the Federal Deposit Insurance Corp. Great Southern also received high marks for its TARP participation from New York-based nonpartisan think tank Ethisphere Institute. Its weekly TARP Index scored Great Southern as high as No. 2 based on banks' gains realized through the program.

Some banks dodged the temptation of accepting federal money available through the Capital Purchase Program, which brought the Treasury nearly $200 billion worth of preferred stock and warrants in American banks. Mid-Missouri and OakStar banks were among them, citing too high interest rates.

Arkansas-based Arvest Bank never flinched at the government's offers, and even built an advertising campaign around their stance: "If someone offered YOU millions of dollars, would you take it?" a print ad read. "Arvest didn't."

Business owners found some relief through loans back by the U.S. Small Business Administration, which received $730 million through the American Recovery and Investment Act. Cameron Roy used a $424,000 SBA-backed loan from Liberty Bank to buy a second area Buckingham's Barbecue restaurant.

But near year's end, business owners are still pleading for available capital. During a business roundtable with Gov. Jay Nixon in Springfield, SRC Holdings Corp. President Jack Stack relayed the common "capital gap" facing small firms that have tapped out their resources but have growth plans in mind.

"Unless we figure out how to invest in those fastest-growing businesses, the whole society will be in no man's land," Stack said in September.[[In-content Ad]]