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By Nathan Peck | MiBiz
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MUSKEGON — Amid all the talk of “flat is the new up,” let’s be honest — 2009 was a tough year.

Volatile markets, a skittish banking and regulatory environment and the threats of a “double-dip” recession were enough to give bankers nightmares. In uncertain economic times, opportunities for community banks are out there, if you know where to look, said Heather Brolick, president and CEO of Community Shores Bank in Muskegon.

With assets of $233 million on just under $200 million in deposits, the 11-year-old bank has been rocked by the same waves of increased foreclosures, devalued properties and slowed demand for commercial loans that has hit the banking industry in general.

Brolick recently sat down with MiBiz to discuss the current lending market and how Community Shores Bank is looking to capitalize on regional and national banks putting resources into other markets nationally.

MiBiz: What is the West Michigan economy looking like now that we’re almost through the first quarter of 2010?

Brolick: There are sectors of the West Michigan economy, because of technology, the services sectors, and despite their difficulties, manufacturing, that have weathered the storm better than other parts of the state.

The question is the demand that is out there — consumer demand is lower. That is probably because they are doing something that is a good thing in the long run — they’re saving more.

We (banks) don’t lead out of a recovery. Manufacturing is starting to feel more confident. They aren’t hiring new people, but they’re bringing back people that they have laid off and are hiring more people on a temporary basis.

MiBiz: What’s particularly concerning as you survey the banking environment right now?

Brolick: I am seeing more consternation and concern out there. There are a lot of mixed signals. We are in a catch-22. Bank regulators are telling you about good practices and procedures — which are of course conservative — but at the same time telling us to be sure that this doesn’t impact our lending.

What’s not being talked about is the impact of alternative financing services leaving the market — some of the capital investors. We can only offer loans up to a certain size — as our customers have grown, we have to find ways to fund pieces of their loans with partners. Nobody is lending to other banks. Without these partnerships, where do these larger customers go? The corresponding banking industry left the market in this downturn.

At some point, correspondence banking will come back, but no one knows what exactly that will look like. The failure of (Silverton Bank, National Bank in Atlanta, a banker’s bank which provided loans to 1,500 banks around the nation in May 2009) concerns me.

Going forward, we will look to reestablish some relationships, but we may have to spread out risk with smaller pieces of loans going to more banks. We used to have two or three partnering banks, (and) it was just easier that way. We’re going to have to bring in more participants to share the risk.

MiBiz: Where are there opportunities for Community Shores Bank?

Brolick: We would like to grow a little bit from an asset standpoint. In Michigan, we want to make sure we are at the bottom of the real estate devaluation in a market as volatile as this. It is hard to determine if we are at the bottom and when things will stabilize. Our capital ratios have taken a wallop. We are under pressure because of our losses in real estate. Many of the TARP recipients used their loans to aggressively write down their distressed properties — we weren’t able to do that.

Capital will come back into the market. The difficulty Michigan has had is that because of our ties to the auto industry and the perception that we cannot get our house in order (pass a budget and work out tax policy), outside investors question why they should get back into the state. They are much less conducive to risk. Why should (regional banks) choose to allocate resources here over a safer bet in Indiana?

Candidly speaking, I see this as a significant opportunity as a partner in the community. I believe we have been patient in our work with customers, have gone the extra mile for our customers under duress, and continue to work with them.

People are starting to see the advantages of community banks. How we have conducted ourselves in hard times will positively differentiate us going forward. That’s a huge opportunity for us.

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• community shores bank
• finance
• heather brolick
• muskegon