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Editorial: Bank turnarounds offer a ray of hope

By   /   Monday, April 26th, 2010  /   Comments Off on Editorial: Bank turnarounds offer a ray of hope

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If there is one thing we’ve learned from the painful experiences of the past couple of years it is this: As banks go, so goes the regional economy.

And from that perspective, it appears the deep recession in real estate is slowly disappearing in the rearview mirror.

Surprise first-quarter profits at Community West and American Riviera banks underscore this fact — along with the stunning rise in shares at Pacific Capital Bancorp, the region’s largest bank.

Pacific Capital’s surge, without any accompanying news announcement, appears to reflect the increased certainty that the bank will be able to begin repaying its TARP loans and operate independently without a massive capital raise or a sale assisted by the FDIC.

Profits, however small, and a leveling off of loan losses at area banks are a leading indicator of better times ahead.

That’s because with regulators demanding capital levels that are outrageously high, banks are flush with cash — and liquidity is the key to meeting demands for loan growth as times improve.

We’re not yet predicting a robust recovery. That will depend on a host of external factors such as improved tourism, good harvests for the bedrock agricultural sector, some hot technology deals and the continuing v-shaped rebound in the manufacturing sector.

There’s also a big question about how active consumers will be in spending money and how quickly the decline in foreclosures will translate into home sales in the depressed “middle market” for residential property.

Finally, there is the overhang from the budget cuts at the state, county and municipal levels as tax revenues, particularly from property taxes, lag the recovery in other places.

But with banks finally looking like they are turning the corner, there’s reason to be optimistic about a return to positive economic growth.

For a region that’s gotten used to the slow-growth pattern that comes with low housing affordability and curbs on new development, any growth at all is going to look a lot like what used to be called “normal.”

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