BIRMINGHAM, Alabama – John Harrison has been on both sides of the bank review process.
President of a community bank for 20 years, he knows what it’s like to be put under the microscope by the Alabama Banking Department. Now, as the department’s superintendent, Harrison oversees the process of ensuring the state’s banks behave properly and take action to maintain their financial health.
âHistorically, our banks have always had excellent capital, excellent management,â he said. “Even though I am appointed by the governor, the state banking department has always been an important source of regulatory oversight for these banks.”
Prior to joining Gov. Bob Riley’s administration in 2003 as director of the Alabama Department of Economic and Community Affairs, Harrison served four terms as mayor of Luverne, a town in Crenshaw County called “La friendliest town in the South “.
In Luverne, Harrison was a founding member of the board of directors of First Citizens Bank and became its President and CEO in 1983, a position he held until his move to Montgomery in 2003. In 2005, Harrison became superintendent of the Alabama banking department.
Harrison’s department oversees roughly $ 220 billion of Alabama’s $ 223 billion in bank assets. Of the state’s 135 banks, the banking department regulates 115.
Three Birmingham banks and a large Birmingham savings bank have gone bankrupt since the 2008 financial crisis. The biggest failure involving an Alabama institution was that of the Montgomery-based Colonial Bank, which cost the Federal Deposit Insurance Corp. approximately $ 3.8 billion in 2009.
Harrison said this year is expected to bring continuous improvement in the health of the banking industry. Active boards and adequate capital levels are two things that will boost the industry, he said.
Q. How is your outlook for banking in Alabama?
A. 2012 started with reasonable expectations of improvement based on Alabama’s local economies showing some improvement. Our banking environment had suffered since 2008 with the real estate economy and has just recovered. We really think 2012 will be a pretty decent year. We always know there are issues and still achieve what we would call full profit until 2014 or 2015.
Q. What kind of improvement have you seen?
A. The reason we have already seen some improvements is that we have seen a slight increase in our employment rate. Our unemployment is falling, but full employment is still a long way off. We have seen a small improvement in real estate, both in price and in activity. Sales volumes or new purchases have increased a little. History tells us that a full recovery has to come from the real estate industry, and we’re not ready for it yet. We don’t see as much of a problem with that in Alabama as we do in some of our sister states.
Q. What has the banking department done to try to keep the banks as healthy as possible?
A. We didn’t predict this crisis would be as bad as it was when it started. We’ve tried to make sure we’ve learned from that ourselves, and we’ve worked with our banks. Our only job is to regulate our Alabama state chartered banks for safety and soundness. We are in the banks every quarter to measure what they have done. We’ve been very critical of some of the things they’ve done in the area of ââloans or investment opportunities. We have tried to do everything we can to work with them to improve what they do and also work as an advocate with them to make sure that the public, shareholders and their clients never lose their trust and credit. in Alabama. banking system.
Q. How have Alabama banks performed over the past two years?
A. When I got to the banking department, we had maybe four or five problem banks that needed improvement. When we went through 2010, we had closed three banks and about 45 – about just over 40 percent of our banks – had some type of what we see as problems. In 2011, we closed another bank, but we were able to replace it with a bank that the FDIC approved for receivership. So we really lost a bank but we gained a new bank. But when we finished 2011, we were down to three or four banks that we thought were major problems.
We closed (2011) by really looking at 35 or 36 problem banks and only three or four that were critical. This year, we expect that list will be reduced to about half. Every banking institution in Alabama was in a better position than in 2010. Some (improvements) were the result of our regulatory work or the economy, but it was also the result of many bankers taking a lot of money. really hard to make the fixes we recommended to improve their institutions.
Q. Do you expect others to fail this year?
A. In 2007 I proudly patted my chest and said Alabama wouldn’t have bankruptcy, but in 2009 I really must have eaten a lot of crow because we had two this year- there and we’ve had two more since. But today, I don’t foresee another bank failure, but again, a lot of it depends on how well these other banks progress. It depends a lot on what they are doing.
I have always been optimistic about our banking environment in Alabama because in most cases they have great leadership, board of directors and employees and what they mean to the communities in which they are located. If and when we get one, we’ll just accept it, but it certainly won’t be because of a lack of effort in the way we try to look at a bad bank or a problem bank because we let us try to guide them and make recommendations to them to follow to correct the operations which present deficiencies.
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