Economy: Credit crunch comes home 

Missoula-based Treasure State Bank signed off on an agreement with regulators last week to shore up its finances, providing a reminder that Montana is not immune to the national banking crunch.

"We're seeing the ramifications of the problems with our economy in the Gallatin, Flathead and Lake county areas. And certainly, as you know, in Missoula," says Annie M. Goodwin, commissioner of Montana's Division of Banking and Financial Institutions.

Treasure State's agreement with federal regulators, called a "consent order," aims to address losses to the bank resulting from loans gone bad. The agreement specifically states that Treasure State neither denies nor confirms unsound lending practices.

"I do know that Treasure State has had delinquencies and more credit quality issues," Goodwin says.

Both Goodwin and Treasure State President James A. Salisbury attribute the bank's financial challenges largely to a lackluster real estate market. As the economy lingers in the doldrums, developers are having a tough time paying back loans. When loans aren't paid back, banks feel it in the pocketbook.

"It's occurring across the board," Goodwin says.

Salisbury also stresses the agreement with regulators was voluntary and points to action the institution is taking to ensure a healthy balance sheet.

Specifically, the consent order calls for Treasure State to raise capital. The bank recently raised $1.5 million through stock sales and is working to purge bad real estate loans from its portfolio with sales to other institutions and foreclosure proceedings. Salisbury says they'll continue steering away from commercial development loans.

"There's just no more lending in that area," he says.

Goodwin cautions that Treasure State isn't alone. She says banks in development-oriented economies, like Gallatin, Flathead and Missoula counties, are working to beef up cash reserves to ensure loan losses are covered and the bottom line stays in the black.

Going forward, Salisbury, who stepped up as bank president in October, says Treasure State will continue cutting liabilities and raising capital.

"You just hunker down and get through this," he says.

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