Mr. Marinac: FIG is a four-year-old independent research company and a broker/dealer that makes markets and banks all over the country. We focus on the mid-cap and small cap arena. I have been a research analyst for 16, going on 17 years, and lead our research efforts for FIG. I'm one of the founding principals of the firm. We have a passion for research within community banking and regional banking. We believe that there are opportunities for investors all over the country. We watch broad trends in addition to individual company trends to find the best ideas for our clients, as well as things for clients to avoid.
TWST: Since our focus this week is on Northeast banks, how has that space done
from a business perspective now that we are three quarters of the way through
the year?
Mr. Marinac: I think that the banks in the Northeast have had slower growth than
banks in other parts of the country. They have also, to some extent, perhaps had
lesser risk from excess construction. There seems to have been a little bit less
boom and bust in the Northeast compared to other regions of the country. When I
compare a lot of the analysis we have done on the West Coast and also the
Southeast, you have had less heavy construction lending in the Northeast than in
these markets. You also have heavy use of broker CDs, particularly in the
Southeast. The banks in the Northeast have not had that same level of either
construction or broker funding. There seems to have been a little bit of funding
advantage in terms of cost of funds being cheaper for banks in Northeast, but,
again, the growth is less.
It depends on your perspective as an investor. If you prefer more stability and
a little bit less growth, you have less to complain about with the Northeast
banks. Having said that, they too have the same challenges that the whole
industry faces in the next couple of quarters, which is that the prime rate has
come down, the loan yields are coming off, and it remains to be seen how well
banks can actually lower incrementally their cost of funds when you are having
loan yields fall along with the prime rate, which of course just happened late
in the third quarter. It's not a third-quarter issue as much as it is a fourth
quarter and first quarter of 2008 problem that we are facing.
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