June 19, 2024
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Forecast: Businesses, banks look for new models


The Tri-Counties starts 2012 with six fewer local banks than it had before the start of the financial crisis, and the local economy continues to stutter through a broader recovery.

But area economists and finance insiders say the region is doing better than the rest of California, boosted by its tourism and technology sectors, and that area banks have shed the deadweight of bad real estate loans and are poised for a stronger comeback this year.

Since 2006, the region has seen three bank failures and three of its smaller community banks acquired by or merged with stronger institutions — a consolidation trend that’s consistent with what’s happening around the country. The remaining banks are better capitalized, have fewer bad loans, and are more able to finance the expansion and startup of area businesses.

“I think it’s going to be a relatively stable year for banks,” said Bill Watkins, the top economist at the Center for Economic Research and Forecasting at California Lutheran University in Thousand Oaks.

“The problems for banks now is … in large part they have cleaned up their balance sheet issues and loan portfolios, but the ones that remain are having a hard time finding loans.”

“The banks and borrowers have become very comfortable with using real estate equity to finance loans, and that’s just not coming back this year,” he said.

Janet Garufis, president and CEO of Montecito Bank & Trust, said weak loan demand continues to remain a problem — businesses are either hunkered down and aren’t expanding, or don’t qualify for loans under stricter new requirements — but that she did see borrower interest pick up toward the end of 2011. “People are maybe seeming a little more confident,” she said. “Or maybe it’s just necessity — they’ve waited so long to make capital improvements that they can’t wait anymore,” she said.

County by county

Boosted by a highly educated workforce, burgeoning wine, agriculture and tourism sectors and a tech startup culture, the Tri-Counties generally boasts a healthier employment picture than the rest of California.

Ventura County has the highest unemployment rate in the region at 9.8 percent as of October 2011, still well below the state average of 11.7 percent. San Luis Obispo County’s unemployment was 9.2 percent in October 2011, and Santa Barbara County’s was 8.6 percent.

Economists have said the region is expected to see positive job creation in 2012.

The professional services and hospitality industries are leading the South Coast’s private-sector job creation, with each adding about 1,000 jobs since the recession ended, Santa Barbara-based economist Mark Schniepp said in a September forecast event in the city.

Schniepp’s forecast predicted about 800 new non-farm jobs will have been created in Santa Barbara County in 2011, with the speed of the recovery picking up significantly in 2012 to add 3,100 new jobs.

He expected Santa Barbara County’s unemployment rate to average 8.3 percent this year.

In Ventura County, Schniepp told business leaders in September that more than 3,000 private-sector jobs had been created in that county in 2011. During that same time, the county’s public sector downsized by about 2,800 jobs.

“The good news is, we don’t expect any relapse of the recession,” Schniepp said then.  “The bad news is, this is the recovery.”

Schniepp said job gains were expected to accelerate in Ventura County in the first quarter of 2012. “Job acceleration is long overdue,” he said. In 2011, the county’s professional services, manufacturing and leisure industries — adding 1,300, 1,100 and 1,000 jobs each, respectively—led private-sector job growth.

In San Luis Obispo County, forecasters from Beacon Economics said in November that while job gains remain sluggish, the area can expect to see unemployment drop by 0.5 percent in 2012, with total nonfarm employment climbing 2.5 percent.

“San Luis Obispo County is leading the Central Coast out of the economic downturn,” Brad Kemp, Beacon’s director of regional research, said then. The city of San Luis Obispo has gained an estimated 2.9 percent of its peak employment back after losing 9.9 percent, he said.

In Santa Maria, business leaders in November said industries such as precision farming, health care, energy and space-related technologies have potential for growth. The area has lost some 2,500 jobs over the past three years.