You may not know it, but the Statue of Liberty was shipped to the US in 350 pieces back in 1885. We don't know how long it may have taken to assemble it, but we are pretty sure it took quite awhile. Fast-forward to 2008 where the US Government is giving out TARP money in buckets in an effort to stabilize the financial system. People are complaining about how slow things seem to be going and taxpayers are frustrated with the progress. Now, we don't know if there were complainers back in 1885, when Lady Liberty was lying around in pieces (waiting for another ship to come in to port with piece #284), but we are pretty sure there must have been. People want to see progress immediately, but stabilizing a highly complex financial system and redistributing TARP back into loans takes time. In addition, major changes have forever impacted the banking landscape (making things even more difficult).
Let's reflect on a few recent events. Consider for a moment, the single deal done between PNC Financial (PA) and National City (OH). While these are big banks, they pale in comparison to the Bank of America/Merrill Lynch, JPMorgan/Washington Mutual, US Treasury/FNMA/FHLMC transactions and many others. Yet, despite the fact that the PNC deal will close on December 31 of this year, full integration won't happen for an estimated 2Ys beyond that. We bring this up to demonstrate the sheer size of the issue when we take that single transaction, multiply it by 25 or 50 more just like it and then we begin to see the hundreds of pieces strewn all over the financial lawn ahead of us.
We cannot know the impact of all the changes that have occurred in rapid succession on the financial landscape, but we do know they have been industry changing. We just hope the FRB and Treasury have numbered the pieces, as they have worked to redesign things, so we can rebuild it all at some point.
For community bankers, in particular, we see some early pieces being offloaded onto the dock that could increase prospects and profitability in the coming months and quarters. Opportunities abound given all the turmoil and some could not have been imagined just a few short years ago when competition was running high. Some banks are strained (providing M&A opportunities), some competitors have disappeared (Wachovia and WAMU on deposits, Merrill on cash management, etc.) and some large banks have even pulled away entirely from various sectors such as small business (giving community banks room to price new loans at much wider spreads). Certainly, stresses throughout the industry are high (deposit pricing isn't moving fast enough to save margins, bank credit lines have been cut by upstream correspondents and borrower credit quality remains splotchy), but we prefer to be positive thinkers.
Therefore, as we prepare for 2009, we see that while the financial pieces stretch to the horizon, this is merely a puzzle for us all to solve. Some days we may easily assemble the pieces, while other days will not be so smooth or straightforward. One thing we know for sure, however, is that community bankers with persistence, patience and a never-ending desire to achieve will find success in 2009. We are talking about community bankers here, so we wouldn't expect anything less.