Acadiana’s banking and financial institutions have long been a contributing factor in Lafayette’s growth and prosperity. Making up 6 percent of the workforce in Lafayette’s MSA — Lafayette and St. Martin parishes — bankers and financial representatives have so far risen above the national mortgage crisis and other downward trends the nation is experiencing. Acadiana’s phenomenal retail sales, unemployment rate and continued success in the oil and gas, medical, and technology industries have also assisted in providing a defense to those trends.

To demonstrate the financial health of Acadiana’s banking industry, LEDA’s staff has assembled a set of statistics, provided by the FDIC, that document these institutions’ financial standing over the last 10 years. The 29 Acadiana financial institutions in the FDIC database represent both national and local establishments whose main office is physically located in the six-parish Acadiana region. As a collective group, or peer group as the FDIC defines them, they are experiencing growth in both deposits and loans. These are just two of a myriad of factors that compose the financial wherewithal and overall health of the banking sector.

One of the measures of financial wellbeing is growth in loans — the more a bank lends to their clients, the more profit the banks can potentially earn. A review of Acadiana’s 29 FDIC-insured depository institutions indicates an average net growth in “loans and leases” of 11.07 percent from 1998 to 2007.  “Loans and leases” are defined as total loans and lease financing receivables minus unearned income and loan loss allowances.  “Loans and leases” growth peaked in these Acadiana institutions at an annual rate of 18.09 percent from 2001 to 2002 (Chart #1). Since 2003, the average annual rate of growth has remained fairly steady at the 14 percent mark.

Another indicator, “total deposits,” includes demand deposits, money market deposits, other savings deposits, time deposits and deposits in foreign offices. Basically, this is money that bank customers are putting into their own accounts, savings or interest-bearing accounts for the most part. Although increases in “total deposits” may directly correlate to the bank’s ability to lend, a bank may not necessarily lend at the same rate as deposits increase or decrease. Lending is a factor of demand for the loans, competition among lenders, the quality of applications received and interest rates.

That’s why when we see the growth rate of deposits decrease from year to year since the peak in 2005, (Chart No. 2) we know that it’s not necessarily an indicator of the strength and vitality of the Acadiana region. We still see lenders loaning at a steady rate despite the fact that people are not saving at a higher rate. The numbers reveal a 6.89 percent growth in total “deposits” from 1998 to 2007, with the highest rate of growth in 2004 at 16.4 percent (Chart No. 2). Here we see an increase in total deposits (Chart No. 2) but a decrease in the rate in which those deposits are growing. Deposits (savings) in 1998 were $3.5 billion (Chart No. 2) and were reported at $6.3 billion for 2007. Again, this indicates a growth over time in total deposits, even though each year deposits aren’t growing at an increasing rate.

Focusing again on “loans and leases,” Chart No. 2 depicts an increase from $2.1 billion in 1998 to $5.3 billion in 2007 for the Acadiana FDIC-insured depository institutions ­— a whopping 155 percent growth in a decade. As seen in Chart No. 1, real estate loans make up 68 percent of those loans and leases issued in 2007 by this Acadiana peer group. Real estate loans are a combination of land development, commercial, multifamily and family residential, and farmland real estate. Family residential real estate loans for properties that house one to four families represent the highest concentration, almost half, of the total real estate loans. Commercial and industrial loans constitute 18 percent of all loans issued.

The most notable difference between 2007 and 1998 in Chart No. 1 is that commercial loans both in real estate and business development make up a larger piece of the pie than they did 10 years ago — 28 percent and 18 percent in 2007 vs. 15 percent and 14 percent in 1998. Conversely, loans to individuals and for residential real estate represent a fraction of what they did in 1998.

The statistics indicate that the financial institutions represented by this peer group are indeed experiencing growth, despite the widespread crises affecting much of the nation. However, local financial institutions still face the challenges that have come out of what is happening in lending in the other parts of the country. Despite not having as many subprime loans and foreclosures as in many states hard-hit by the national mortgage crisis, local financial institutions must still be concerned with negative effects of external forces and a more wary consumer. Acadiana has a tradition of rising above, bucking the trends, and employing a wildcatter mentality. These are the things that will undoubtedly offset those factors that local institutions have no control over. These are the things that must, more than ever, take precedent to see continued success.

View chart 1 and chart 2.



Gregg Gothreaux is president and chief executive officer of the Lafayette Economic Development Authority.

 

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