Local Commercial Lending Stays Strong

While Tulsa’s commercial lenders are primarily unphased by the pervasive credit crunch that has stifled business on both coasts, local bankers are keeping a cautious eye on watch for ripple effects from the perceived recession.
For the most part, however, for local lenders it is substantially business as usual.
In fact, Michael Nash, executive vice president of the Tulsa offices of Kansas City-based UMB Bank, said the local office’s loans, which are primarily commercial and corporate, grew 37 percent in 2007, from $33.6 million to $46.4 million. UMB has $165 million in commercial loans in Oklahoma, out of a bankwide portfolio of $3.9 billion.
He said the tightening credit market in other parts of the nation is not affecting how UMB does business in Tulsa.
“We are really not having to make any adjustments,” Nash said, noting the 95-year-old bank has continued to practice “the same prudent loan underwriting standards.”
“Our powder is pretty dry, so to speak, in terms of the fact that we have liquidity now, and we are able to lend to good solid companies that need to borrow on the same good solid terms that we have been lending over the years,” he said. “We did not play in the sub prime lending market. We did not engage in mortgage-backed securities. So we are not having to deal with some of the problems, and reserve some of the losses, that some of the larger banks that did enter into those transactions are having to deal with right now.”
With 31 years experience in the Tulsa banking market, Nash is in a good position to assess the business climate in Tulsa.
“Tulsa area businesses – general commercial, manufacturing, wholesaling, distribution businesses – for the most part, have adapted and continue to do well. When they couldn’t sell locally, they sold regionally. When they needed to they increased their exports. They have innovated and found ways,” he said. “I don’t think my portfolio is much different than many other of the good mid-sized commercial banks in Tulsa. It’s healthy. I have no problem loans. My companies are doing well.”
Nash said his portfolio is primarily comprised of small-, medium- and corporate-size clients with little real estate financing.
“We just don’t do residential real estate development,” he said. “We only do commercial real estate lending – owner occupied or investor owned with good solid background.”
Rick Huck, executive vice president for the Tulsa regional offices of Bentonville-based Arvest Bank, also noted that “commercial business in the Tulsa metro area is doing very well.”
“It’s stable – there has been no slowdown. We have not experienced what some of the other markets have gone through,” he said.
With $850 million in commercial loans in the northeastern part of the state – $800 million of that in Tulsa, Arvest has not seen significant changes in its commercial lending, Huck said, noting the strengths in the aerospace and energy fields, particularly in affiliated businesses, such as manufacturing.
“We have been in what I call a good economy for several years,” he said. “With local businesses, particularly those in manufacturing using a skilled labor force, the biggest problem is the shortage of skilled labor right now.”
Brad Vincent, senior vice president and senior manager of corporate banking for Tulsa-based Bank of Oklahoma, said lending practices have helped insulate the region from the credit issues plaguing more volatile parts of the financial market.
Vincent, who manages the corporate banking group in Tulsa, which primarily works with commercial and industrial businesses with revenues of $10 million and up, said BOk has built its business on relationships.
“A lot of what we have seen over the past 3-5 years is more transaction oriented banking that has led perhaps to more of the credit crunch discussions that you hear in the national and regional media,” he said. “For the type of lending we do with Bank of Oklahoma, we are not transaction lenders, we are relationship lenders, and the approach we take today is the same as the approach we took yesterday and a year ago and three years ago. It is to just continue to block and tackle, roll up the sleeves, try to understand your customers’ businesses as much as possible and be in a position to proactively address challenges and opportunities for your customers.”
With $1.1 billion in commercial loans in the Tulsa market out of nearly $5.9 billion in Oklahoma and $12 billion regionally through the banking institutions held by its parent firm, BOK Financial Corp., BOk has seen little change in how it does business with its commercial clients, Vincent said.
“I haven’t seen a big change in what they are asking for,” he said. “Some of the easy money that was available nationwide, perhaps as recently as nine months to a year ago, was more on transactions that involved buyouts or multiples that might have been at historical high levels. But the day-in day-out support of an existing company, helping them grow and helping local companies continue to execute on business plans, its pretty much business as usual in this market.”

Overall, Tulsa bankers see stability in the local economy that has buffered Tulsa business from the stresses testing the nation’s economy, and although local effects are minimal, the area’s business people have learned from previous booms and busts to be conservative.
Gip Gibson, president of single-location Tulsa National Bank, 7120 S. Lewis Ave., points to economic forecasts that “suggest the market will be somewhat similar to 2007 – there is projected job growth and wage increase, very similar to what we saw in 2007, which is fortunate. Many markets are experience decline in jobs and decline in wages and decline in home values, and that’s not projected for our market.”
“Still we have seen some softness, particularly on the residential side,” Gibson said. “And, yes, it’s causing us to be cautious and in the decisions we are making.”
With about $140 million in commercial and real estate loans, Gibson said the bank has primarily stepped up its evaluation of loans.
“Our emphasis right now is on quality and trying to prudently and conservatively underwrite and originate loans,” he said.
Huck also noted that if Arvest is seeing an effect on credit in the local market, it is on the mortgage side.
“Probably the greatest impact has been on the mortgage side,” he said. “It has had ramifications in our originating mortgage loans. There is a ripple effect, although I don’t know that we have really seen it on residential construction.”
He said Arvest is also keeping an eye on the nation’s overall economy.
“We are having to watch not so much what is happening in the credit markets, per se, but more so the ripple effect and will that push us into a recession, or are we in a recession,” Huck said. “If that continues to progress, as far as a slowing economy, then it will slow our business. We are watching it, we are not reacting, certainly we don’t intend to overreact. We have always tried to have a consistency through the goods times and the slow times, but it has been good for a long time here.”
Nash said Oklahoma’s economy continues to benefit from several factors that have insulated it from the national economy.
Citing the Tulsa MSA jobless rate of 3.5 percent compared with the national unemployment rate, which just jumped from 4.8 percent to 5.1 percent, Nash said, “We are buffered to an extent by the significant resources of the oil and gas industry that we enjoy here in Oklahoma, and clearly the strong economic performance in that industry is holding us up a little bit and supporting us.”
He noted that traditionally, middle America has been slower to feel the impact of good or bad economic condition than have the east or west coasts.
“We probably still have yet to feel some of that impact, although from a property valuation standpoint, we are not going to be hit as hard, because our properties didn’t skyrocket up in value like they did on the coasts,” Nash said. “If you don’t go up as much, you don’t stand a risk of going down as much.”

Local bankers also see a strength in local lending and business born of the oil and banking bust of the ‘80s.
“There is a lot of executive bank management in Tulsa, at many different Tulsa are banks, that have been in this market 25-30 years and understand what it is to go through a downturn,” Nash said. “I think that is helping most of the Tulsa banks continue to perform pretty well.”
“The good deals are competed for very hard,” he said. “A lot of commercial clients have learned the art of the RFP and banking has become very competitive here in Tulsa.”
Competition is ultimately good for commercial clients who choose a bank “that will stay with them through thick and thin,” Nash said.
Vincent, whose banking career started in 1982 two weeks before Penn Square Bank failed, agreed that the hard times have strengthened Oklahomans’ business skills.
After the Penn Square failure, “the next 10 years were extremely challenging in many respects, but also in many respects were outstanding learning opportunities as well,” he said. “At the end of the day, it made us all better business people, not just better bankers, but I think our customers are much more wise and well informed vs. not having gone through that as well.” ?



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