FSG Bank CEO Michael Kramer told members of the Civitan Club on Friday that banks are more important today than ever - now that many other type lenders have gone away.
"Most non-bank lenders are gone," he told club members at the luncheon at the Bessie Smith Hall.
As a result, he said there is fierce competition between community banks to lock down new loan accounts.
:"I have never seen the lending market so competitive," he said.
Mr. Kramer said he may "give" in negotiations with potential borrowers on rate, "but not on credit."
He said one sour $250,000 loan can have a significant effect on the bank's bottom line.
Coming to FSG Bank in December 2011, he said the bank had accumulated a huge amount of bad loans. Writing them down cost bank shareholders millions of dollars, he said.
Mr. Kramer said when the reserve ratio of a bank drops as low as two percent, it is in danger of being taken over by regulators. He said FSG got that low at one point, but, with an infusion of cash from new investors, is up to an 8.4 percent ratio.
He said bank "branches" are not so important in the age where many do their banking online and never visit a bank of any type.
Mr. Kramer said a bank now considering a new branch would go for one with about 1,500 square feet and three drive-thru lanes. Years ago, he said the bank would have been designing a branch with 4,000 square feet.
He said banks are scrutinizing loans much more carefully, but he said the cartoon showing the banker requiring a 300 percent down payment is not accurate. In fact, he said he worries that banks are again becoming too lax in credit checks, which he said could lead to new problems.
Mr. Kramer said the Small Business Administration has improved in recent years and it now operates closer to a business. He said many banks partner with the SBA and with the USDA.
He said, contrary to media reports, the federal government and taxpayers did not get soaked under the TARP program in which there were major cash infusions to troubled banks. He said the government wound up with a tidy profit.