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Business & Tech

Local Banks, Businesses Struggle in Tough Economy

Two area banks on state's watch list. In Geneva, "not a lot of people are looking for business loans right now."

Geneva and area banking institutions are facing tough times in a tough economy. With fewer people taking out business loans or mortgages, capital for several area banks has significantly diminished.

Bob Kerbs, vice president of State Bank of Geneva, says the bank is "holding its own" but is concerned about the state of the local economy, particularly after seeing two local banks recently land on a "top 10 most troubled" watch list for the state of Illinois.

Valley Community Bank and Old Second Bank shared the state's lowest ratings last month in the Bartmann Bank Monitor Report. Valley Community Bank is based in St. Charles and has a branch in Geneva. Old Second Bank, based in Aurora, had a branch in Geneva until about two years ago and still has two branches in Batavia and one in St. Charles.

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Old Second is being monitored by federal regulators because its capital levels are under normal minimums. At the bell on Tuesday, OSBC closed at .97, down 6.73%. Yahoo! Finance indicates during the last 52 weeks, prices have ranged from .69 to 7.47.

The Aurora-based bank recently announced in a press release its intent to cancel TARP dividend payments, and will also delay issuing new common stock in an effort to raise equity. 

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Valley Community Bank, established in 1996 with six locations in the Fox Valley including Geneva, has publicly called for investors to help it raise at least $8 million in capital.

Kerbs said the State Bank of Geneva is hopeful for an economic recovery but "we still haven't hit the bottom yet."

"We get a lot of requests for refinancing mortgages," Kerbs said. "But we're basically a commercial bank, and not a lot of people are looking for business loans right now.

"They [businesses] don't need the money yet."

It would be safe to say the financial climate right now is volatile. That's the assessment of Donald Cummings, managing partner of Blue Haven Capital located in downtown Geneva.

"I'm very wary of where bonds are, very high priced," he said.

Cummings said 20- to 30-year bonds with a long maturity are going to see a dramatic drop in price. For that reason, he says Blue Haven has been "taking a little out of bonds, and buying a little bit of stock."

Mark Allen, owner of A.L. Allen & Sons, a three-generation land development firm specializing in commercial and agricultural properties, said the answer to the economic problems the country is facing are simple.

"There's high unemployment and poor consumer spending," he said. "Solve those problems and the real estate market will recover."

Of course, that's easier said than done. The Bureau of Labor Statistics shows last month's unemployment rate was up, to 9.6 percent.  That's because job creation remains stalled and the number of those looking for work continues to grow.  Unemployment has stayed higher than 9 percent for 16 months.

Not surprising, Allen said Kane County's real estate remains down despite a slight improvement in the market due to President Obama's stimulus plan that has now expired.

Meanwhile, the economic times are hard for Geneva businesses, as well.

Mike Doerner opened Doerner Jewelers at 102 E. State Street two years ago. "We're struggling, like a lot of businesses," he said. "I've noticed at least 10 businesses down the street that are now vacant just since we opened."

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