Regarding the loans you are currently working on, they point a bit to what I see. Service industries are doing okay, HVAC, mechanics, plumbers, etc. Are these the sectors improving on your end of business loans?

I see some service businesses doing well, but so are some of my mfgs. I bank 175+ companies in GH, Thurston, Pacific and Lewis counties. Some are doing well, others okay, some are sucking wind.



I understand that you are actively looking to put the money to work, is there a point that the deposits get so high to force bank policy changes as to individual parameters for a loan?

There is never a point where a lender should set aside sound lending practices, although lawmakers with short memories will ask us to do so. I blew snot out of my nose during the State of the Union speech when Obama said that red tape (created under his watch) needed to be eliminated so that banks could lend money to home buyers. He blamed banks for tightening up lending criteria, when it really was the regulators driving the process, and the regulators work for .GOV, not the banks. Not trying to be partisan at all, but it is a recent valid example of my point.

We have gotten out of the market somewhat in some sectors that we had participated in in the past, like Spec construction, raw land, and a few other categories. As markets improve, we will re-enter those markets slowly. Spec is where we took our biggest hits, mainly up north in Whatcom County, but also in Clatsop County. We had no spec issue in my market, thankfully.


As to strip malls, a lot of them that I have dealt with personally have been owned by families and partnerships for a long period of time. Those who sold in 2004-2005 did well to get out as they likely sold at the top of the market. If they held their properties, many of these folks had minimal debt. Anybody who bought since 2005 or so and financed them highly, and is experiencing a lot of vacancies, are probably sucking wind about now. Someone who bought and held and made a substantial down payment, rather than just minimally investing in it with the intention of flipping, is probably doing just fine. It really depends on the area, and most importantly, occupancy. Blight breeds blight in strip malls.

I had one in Ocean Shores that I banked many years back at Seafirst. The stores sold the same crap that all the other stores sold, the guy had minimal debt, and he was printing money. This was back in 1998 or so, but I think he was grossing around $150,000/yr in rents, debt service was $25,000 annually, annual taxes were $25,000 annually, and insurance wasn't much more. Net cash flow was in the range of $70,000 in 1998 money for a property he paid $300,000 for a few years earlier. This was one of his buildings, and he had many. He also had a lot of toys. I remember numbers. Folks like him who held through this are doing well. Saddle a property like that with lots of debt, and low occupancy, and it will become a problem loan.

You can't lump all strip malls together though, just like you can't lump all in a generation together. Each one is an individual.