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Community banking insider sheds light on financial crisis

Mary Ellen Biery
September 9, 2013
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Bob Koncerak, who has nearly 30 years of experience in financial services and corporate finance, is the author of a new book that gives an insider’s perspective on Georgia’s community banking industry during the boom years up to 2007 and through the U.S. financial crisis and its aftermath. The Most Fun I Never Want To Have Again: A Mid-life Crisis In Community Banking is part history, part leadership and business advice. In the excerpt that follows, Koncerak describes the environment as he began to help develop a new banking enterprise, Touchmark National Bank, during this historic time period.

Koncerak is currently engaged as executive vice president and chief financial officer for a multi-bank holding company in Alabama, and he is principal at BankForward Consulting, LLC. He has held both managerial and executive positions throughout his career, including Capital Markets CFO at the former Wachovia Bank, and the executive vice president/CFO for the “de novo” launch of Touchmark National Bank. Koncerak lives in Alpharetta, Ga.

The Original “Fiscal Cliff”

We cut a ribbon, we took some photos, opened accounts for employees and directors and set about the business of running our new banking company.

One more time: recall how banks generate revenue:

“Banking operations…will depend on net interest income for (its) primary source of earnings. Net interest income is the difference between the interest we charge on our loans and receive from our investments, our assets, and the interest we pay on deposits, our liabilities. Movements in interest rates will cause our earnings to fluctuate.”

Below, courtesy of, is an insightful graph that displays primary interest rate trends between December 1999 and August 2012.

Alan Greenspan’s Federal Reserve began raising interest rates in the fall of 2004 in order to dampen inflationary trends in the economy. Rising rates are generally good for bankers because, like gas stations, bankers are quick to bump up prices to stay ahead of rising costs. On the other hand, bankers try to lag price reductions when rates are falling to support their margins.  Falling interest rates generally indicate a lower demand for lending, and smart bankers will prepare for softer business conditions.  So by the fall of 2006 when the Fed had finished raising rates (represented by the plateau in the center of the graph), bankers were recording good margins as the economy adjusted to a higher rate landscape.

Had you been looking out over Atlanta in June 2006 from atop the majestic Prime Rate Plateau, you might have spotted the Formosa Rose organizers somewhere in Gwinnett County as they laid plans for a new banking enterprise. Were you to stroll through time across the level plain of 8.25% prime rate history into January 2007, you could have spotted Bill and I at the Houston’s restaurant in Buckhead as we discussed working together in a new banking venture. Amble on further and you could watch as our management team labored over growth forecasts and hired employees ahead of launching our new bank. Finally, by peering over the September 2007 ledge of that 8.25% precipice, you could watch as the first of our 2,357 prospectuses was dropped into the US mail. Careful—don’t take another step. The fall could kill you.  You’re standing on the original fiscal cliff.

During the course of our stock offering—between September 2007 and March 2008—the Open Market Committee of the Federal Reserve lowered the prime rate six times in rapid succession. Six.

Between the date that our prospecti first hit the mail and the date that we ultimately reached our minimum required raise, the prime rate was lowered three times, from 8.25 percent to 7.75 percent.

From the date that we reached our minimum capital raise and the date that we opened for business, the OMC reduced the prime rate twice again, from 7.25 percent to 6.50 percent.

Two days after we opened for business, the OMC lowered the rate one more time, from 6.50 percent to 6.00 percent.

And they didn’t stop just because we’d opened our doors: by the end of December 2008, the prime rate came to rest at 3.25 percent—the same level it holds at the time this book was finalized for publication in July 2013. For lending institutions, sliding down that precipice was nothing short of brutal.

Here’s the best analogy I can offer for the situation:  cars can run on gasoline purchased at $3.99 per gallon just as well as they can on gas purchased at $2.50 per gallon.  But when gas prices are falling, it’s because there’s less overall demand in the economy for fuel.  The Federal Reserve lowers key borrowing rates to try and make funding cheaper when the demand for borrowing falls…which means that borrowers have less need for the fuel that the bankers are selling.  Those familiar with the financial straits of 2008 will recall that the Fed released vast sums into the money supply and made extraordinary commitments during this time as worries over funding sources brought inter-bank lending to a standstill.  It was a morbidly fascinating time to be a student of the markets.

That long flat line at the base of the December 2008 cliff is sadly symbolic of the ensuing cardiac arrest that befell the American economy. Oh, and those dotted graph lines below the prime rate? Those are Fed funds and LIBOR benchmarks also crashing to historic lows.

About the Author

Mary Ellen Biery

Senior Strategist & Content Manager
Mary Ellen Biery is Senior Strategist & Content Manager at Abrigo, where she works with advisors and other experts to develop whitepapers, original research, and other resources that help financial institutions drive growth and manage risk. A former equities reporter for Dow Jones Newswires whose work has been published in

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About Abrigo

Abrigo enables U.S. financial institutions to support their communities through technology that fights financial crime, grows loans and deposits, and optimizes risk. Abrigo's platform centralizes the institution's data, creates a digital user experience, ensures compliance, and delivers efficiency for scale and profitable growth.

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