The Herald Bulletin

March 27, 2011

Bankers believe the worst has passed

By Lisa Allen
For The Herald Bulletin

ANDERSON, Ind. — “In the first half of 2010, we were faced with a lot of our customers coming off a very poor 2009, which required us to shore up our loan reserves,” said James C. Marcuccilli, president and CEO of Star Financial Bank, which has six Madison County branches. “That started out very disheartening for the first half of the year.”

Fortunately, the second half of the year “improved immensely,” and 2010 ended up to be a pretty good year, Marcuccilli said.

As for 2011, “in the first month so far, we are seeing less and less credit problems. The last half of 2009 and first half of 2010, you saw people who couldn’t make it.

“Our customer base, which is manufacturing and retail, dropped from running at 100 percent capacity to 50 percent. They learned how to survive at that level. And they are operating now at 60 percent at a profit.”

And they are doing it without help. “A lot of people didn’t ask for loans. You learn how to live within your means,” Marcuccilli said. “We are like any other business, we cut our overhead. Our margins are better because the rates are so low.”

However, Marcuccilli doesn’t foresee big improvements for 2011 on the consumer side “because we don’t see a change in employment. We are a consumer bank. We’ve grown our households, they just aren’t borrowing as much money.” However, he does see more opportunities in small business loans and commercial and industrial loans.

Specifically, “the Anderson market has been very stable for us. Most of their decline we saw in the late 1990s and early 2000s.” Mortgages shot up when rates dropped to 4 and 4.5 percent. “The housing market did not devalue like it did in other markets.”

Rick Moore, sales manager for the two Anderson branches of MainSource Bank, also sees daylight.

“The fourth quarter of 2010 was the best quarter we’ve had in two years,” he said. “We’re starting to see growth. We’re making some money.”

The bank’s core is small — local businesses. “We need to see small businesses adding jobs,” he said, but he’s confident the worst is past. “We’ve worked our way through the ‘dark period.’ It’s going to be small businesses that lead us out of this malaise.”

MainSource, with four branches in Madison County, has money available to loan small businesses, he said. “We use our knowledge of the community to help our customers.”

As those small business owners get more confident that the economy is solid, they will make investments and add employees, Moore said.

They are the backbone of Anderson’s economy, he said.

“Anderson has gone through a metamorphosis, from a major employer, General Motors, to entrepreneurs,” Moore said.