BRIAN’S BLOG

Giving Back!

2010-12-13T14:56:00.000-08:00

A hallmark of Charter Oak Bank has been giving back to our community. Every employee takes an active part in following their passion in giving back. Our philosophy is rather than just giving back - we pay it forward. By being active in helping our community we are helping support the future of our community. By leveraging the talents that we have – we create value in the areas we give – and thus transfer that gift into something larger for the future of the Napa Valley.

This is the time of year we think of donations – whether it be a donation of our time, our talents or dollars – December is a month of giving. If we each help ten people, and they each help ten people – with time, talent or dollars – the multiplier effect could be phenomenal. But as we all know our community needs are year-round. Thus we need to be involved year-round. Have you considered getting affiliated with a community organization – in any form? Your involvement could be as a board member, a committee supporter, or just volunteering your time on a regular basis.

This coming year – 2011 – will still carry over 9% un-employment for most of the year. And that figure does not count the number of underemployed – those that took jobs to get food on the table, but not earning enough to pay the rent. Our non-profits here in the Napa Valley are being stretched in this recession. Utilization is up – we are seeing more domestic violence, longer lines at the food bank, greater stress and more mental health issues - - while donations are down to the very organizations trying to provide support to these areas. A double whammy!

Thus the plea for your time, talents or dollars to help just one organization – and getting ten friends to do likewise. And if they would each get ten friends, etc. etc. By giving back, we pay it forward.

The Economy – Where Are We?

2010-10-25T09:59:00.001-07:00

The economy – where is it at? The September unemployment rate for Napa County of 9.3% is unchanged from the prior month, and California’s 12.3% and the U.S 9.6% are only 0.1% up from prior month. Essentially, all three unemployment rates have been flat for almost 12 months. The rise has stopped, but the decrease has yet to happen. These numbers still are not saying much about under-employment – where so many people may be employed, but are living below their needs or means.

The recent Napa Chamber of Commerce Economic Summit featured a speaker, Marc Johnstone, touting a double-dip – a “W” recession. There seems to be more evidence that this more a probability than a possibility. What does this mean? That we will have another form of recession before it gets better. There is much to be said of how this will happen – could be local government induced as they cut back to meet budgets or perhaps it could be the lack of retail growth. It is not likely that this next drop will be as severe as in the past few years. In any case what it does suggest – that at best case, we will at least remain in a flat economy for well into 2011.

If you missed this year’s Napa Chamber Economic summit - check out their website www.napachamber.org for the PowerPoint’s presented. On the site, under the “Napa Chamber Resources” column – click on the first item titled “E3 Conference Resources” – for Marc Johnstone’s presentation and a wealth of information about our workforce.

Harvest in the Napa Valley

2010-10-17T14:22:00.000-07:00

We have had a long growing season for grapes– with good heat only in the last month or so. But first to the pumpkins. In case you missed it – CBS’ Sunday Morning featured Napa Valley’s Lee Hudson. Lee is a premier grower in Carneros – not only of grapes – but as on the tele this morning – of giant pumpkins. Giant means really big – 1,400 pounds – forklift size. While Lee was eclipsed by a 1,500 pounder in the Half Moon Bay contest – he brought notoriety to our Napa Valley. I understand our valley will also be featured on NBC this coming week.

Back to the other harvest – grapes – what a growing season. Cool through most of the summer – with some heat only in the last 6 weeks – saving us from a really late harvest. Hopefully the Sunday rain is just a dusting and we’ll have a windy warmer Monday to dry out.

There was some damage do to the intense heat of a few weeks ago, but overall reports are that the crop looks good – even great with the long season. At mid-October, the harvest is well underway in many parts of the valley – with the normal Cabernet coming in last – out there a week or so. If we can just stay dry with moderate warmth – the harvest should wrap up fine and produce another great vintage.

Technology Today

2010-10-12T12:46:00.000-07:00

It’s hard to dispute the value of technology – considering the increasing speed of communication and the efficiencies gained. One can hardly keep up with the number of improvements daily in both software and hardware. We at Charter Oak Bank are continuously working on the growth of our systems – both for internal bank use, and for our customers. With Innovation being one of our core values, we strive to be a technology leader with industry proven services.

This was the case with our Remote Deposit product. Our business customers have been able to use Remote Deposit for over 4 years. In the next year or so – our consumer clients will have a similar product available to them so that they too can deposit checks from anywhere in the world – through their smart phone. Our Mobile Banking product COB Mobile allows our consumer and business clients to do most everything you can do with our on-line banking product. NetTeller, our on-line banking system has always provided real-time transaction reporting so our customers can see their transactions immediately whether it’s from their computer or smart phone.

Actually, I think we would be even further ahead with new tech banking products – were it not for the need for strong security. Having products with ample and strong security features is paramount to safeguarding our client’s funds. Our technology employs cutting edge security features coupled with dedicated backend monitoring. While our security features are extensive it is imperative that our customers remain vigilant as well. Most fraud is perpetrated through the end users (our customers) computer. We encourage all of customers to invest in strong security software that is internet based so that you are current with the latest upgrades. Another key to preventing financial fraud is actively monitor your accounts, balancing your check book regularly can help keep you attune to any strange transactions. Consumers should perform an annual credit checkup to make sure their personal information has not been compromised.

How does one keep up with the latest? I would strongly suggest considering the possibility of outsourcing your computer maintenance. We do – we outsource our PC and server maintenance to a firm that specializes in IT Support for banks. For Charter Oak Bank it is conducive to utilize an outside company. We are bankers – not computer specialists. Our clients are great in their field or endeavor – but not always in computer science. Businesses need to assess their individual situation when determining whether to manage IT in house or to outsource. The best avenue for determining this is to do a cost analysis that looks at the time and costs associated with doing the work in house (salaries and hours) versus the cost of outsourcing. There are many firms here in the Napa Valley that provides computer support and services.

For more information regarding our banking technology and fraud prevention please contact us at 707-265-2000.

Unemployment

2010-09-22T08:22:00.000-07:00

The unemployment rate in the Napa County was 9.4 percent in August 2010, unchanged from a revised 9.4 percent in July 2010, and above the year-ago estimate of 8.8 percent. This compares with an unadjusted unemployment rate of 12.4 percent for California and 9.5 percent for the nation during the same period, both virtually unchanged from the prior month. Napa continues to be 3rd or 4th best of the 58 counties in California - with Marin & Santa Barbara besting us.

While we're read this week that the recession ended in June of 2009 - try telling that to the one-in-ten people unemployed or to the one-in-five who are either under or unemployed. This group is not spending - prolonging the recovery. We also heard this week that one-in-seven Americans are at the poverty level.

While Fall tourism is helping fill restaurants and hotels, the retail sector in Napa continues to struggle. This "L-shaped" recession continues on the bumpy straight line - without much improvement in sight for the remainder of this year. But the pundants say we will have some return to normalcy in 2012 and 2013.

COB Results

2010-09-11T08:28:00.000-07:00

Recently, there has been media attention about Charter Oak Bank and our second-quarter financial results. I want to take this opportunity to provide you with information about our results and our strategy for the bank’s future.

In the second quarter, the management and Board of Directors of Charter Oak Bank decided to significantly increase our reserves for potential loan problems. While these loans may ultimately perform, given the economic struggles facing our community and those that we serve, we believed this was the prudent thing to do.

The consequence of this decision is a second quarter loss of $5.8 million. Even so, we believe that the ongoing operations of the bank are fundamentally sound. In fact, in the first eight months of the year, we had an operating profit before reserves of more than $1 million. August 31st assets were $145 million, with deposits at $124 million. Our deposit accounts are FDIC insured up to $250,000, with 100% coverage on non-interest bearing checking accounts.

We have agreed with regulators that it would be best for Charter Oak Bank to raise additional capital to strengthen the bank’s balance sheet and to implement a strategy for growth. We are in the process of raising that capital.

We appreciate the opportunity to serve you and provide the personal service unique to community banking. Charter Oak was founded to support the local community, helping businesses and families access the financing they need to grow their businesses and achieve their dreams. We remain committed to that mission.

If you have any questions, please do not hesitate to contact me at 707-265-2001 or bkelly@charteroakbank.com.

Brian Kelly
President & CEO

Shop Local

2010-08-02T05:28:00.000-07:00

This weekend’s Napa Valley Register featured a lead article on Piner's Ambulance’s bid for re-appointment covering Napa County. This is a publicized example of how government recommendations sometimes just don’t make sense. As a letter to the editor today questions – are their any “points” given for being a local firm – employing locally, and the multiples thereof – taxes and use of local services. We featured a full-page ad this past week in the Register noting our support of Piner’s. The Board of Supervisors will take up the appointment in the next month or so.

The Chamber’s “Shop Local” campaign prompted us to look at our own record at the bank. Over 75% of our vendors and over 75% of our purchase dollars are local. I wish it were 100%, but there are some products germane to our industry that can’t be purchased locally. We will continue to give the purchasing advantage to local bids.

I would encourage all businesses in Napa to perform an internal audit of your purchasing dollars. Also to consider reviewing your policies on what bidding edge you give local contractors and purchases. The City of Napa’s 3% doesn’t cut it. They aren’t considering the multiplier effect – where buying locally keeps taxes local, and furthers employment of those in our local.

Please Shop Local.

The Conundrum - Under-Employment

2010-07-19T06:49:00.000-07:00

While nationwide and state unemployment rates showed a slight decrease for June - Napa County's unemployment rate actually rose slightly from 9.0 in May to 9.3% in June. Positive is that we continue to show 4th best in the state's 58 counties. Digging into the numbers - the number of those employed actually rose in June. What caused the unemployment rate to rise was that more people entered the workforce than prior months. In numbers, those seeking work in Napa County rose by 400 people, while the number of jobs created only rose by 100 - thus a rise in unemployment.

This conundrum will continue as we begin to show some rise in the economy - more jobs being created - more people will decide to seek out jobs or try to upgrade their jobs to prior levels (underemployment). So I don't see rapid decrease in unemployment rates anytime soon – as we work through this bubble.

As I've mentioned before, an economy carrying one in every ten people out of work - affects purchasing, especially discretionary products. This will prolong rapid job creation. Will we have the double-dip - another big bump in this recovery - as many predict? Will the state and local government, including school districts - begin to shed jobs as budgets tighten? I hate to be pessimistic - but there are too many if's out there to say that the economy's solid recovery is right around the corner - more like well into 2011 or even early 2012.

Economics: Building The Local Economy First.

2010-07-11T12:44:00.001-07:00

As we begin to come out of this prolonged recession, a number of sectors of the economy are showing improvement. Locally, for the hospitality industry, sales are better in 2010, than for the same period 2009. Restaurants and hotels are now seeing volumes pick-up.

However, there are some sectors that are lagging and still exhibiting difficult times. Retail and local government are two examples. And then there are the un-employed. Napa County is better than 90% of the state - with only a 9.0% un-employment rate. Those one of every eleven workers are hurting and still feeling helpless, trying everything possible to make ends meet.

Across the country, communities are coming together to fight this recession through “buy local” or “think local first” campaigns. Businesses come together through local chambers to invest and support each other and promote local businesses as a way to boost their local economy.

The theory behind such campaigns is simple, focus spending locally to build local businesses and thus increase local jobs. While we can’t do much for the national economy, we can certainly try to improve the local economy. As a consumer and a small business it means making a conscious effort to spend locally. We must remain price conscious, but understand that sometimes a small premium is often worth it in the long run. In the Napa Valley, we have historically operated on the “local first” mentality. Our businesses have roots that run deep whether it’s a winery, construction company or local grocer. The problem is that during these tough times we become fixated on a short-term solution. Seeking to cut costs, we go outside our community searching for the low bid. This however comes at a cost. Not only are we taking our sales tax dollars and dropping them in the neighboring communities, but we are actually damaging the local businesses. I have seen local contractors and service providers being passed by - for local government projects outsourced to cheap labor from miles away. Out-of-area construction companies giving low unrealistic bids to land a job with no ties to the community, only to leave just as quickly as they came.

I feel that it is important for us to be conscious of our local businesses when shopping. The recent state of the city for April 2010 indicated sales tax revenue is projected to be $1.3 million less than expected for 2009/2010 and $1.2 million less than expected for 2010/2011. On top of this real estate values have dropped 41% since 2007, transient occupancy taxes are down, and permit revenue is also down. Looking at this summary it is clear something needs to change, our local economy needs to improve and it starts with us. It starts with residents and local businesses coming together and supporting each other. We need to increase the spending locally so that we can begin to turn this economic recession around. We need to get in the habit of buying local and supporting local development, so we can continue to keep that unique beauty we are so used to.

Let Sanity Pervail

2010-03-20T11:31:00.001-07:00

A friend of mine and banking consultant, Anat Bird, paraphrased a recent Wall Street Journal article with a great perspective.

Holman W. Jenkins published a brilliant article in the WSJ the other day. I feel compelled to paraphrase it and share it with you.

The article focused on the root cause of the financial crisis and Obama’s attack on the banks. The central question which Jenkins poses, which too few people ask, is: “Were the banks insolvent or were they victims of a liquidity panic?” In fact, as we all know, some banks were indeed insolvent, but others faced liquidity panics often induced by legislator (remember Schumer?) and regulator overreaction and vilification of all banks.

Jenkins points out something we all know: nearly all TARP advances, including warrants, have been returned to the taxpayers with a meaningful profit. What this means is simply that bankers are now being punished for losses that were actually incurred by Fannie and Freddie, some insurance companies and auto manufacturers which maintain union jobs at economically unsustainable levels.

Jenkins further reiterates the reason for the presence of a lender of last resort in financial systems, which is what the Fed is. The purpose of such a lender is to make sure that lenders with good collateral won’t go under when a liquidity panic occurs. “Just as an apartment building can become unsellable even though its tenants continue to pay on time, so can a triple-A rated CDO held by a bank become unmarketable even though the underlying borrowers continue to pay”.

Banks indeed made many mistakes during the period preceding the crisis. Concentrations in both commercial real estate and single large borrowers ran rampant. Stress testing wasn’t nearly as robust as it needed to be to fully capture the risk on many banks’ balance sheets. At the same time, is it appropriate for banks to lose the entire value of assets that, had they been held to maturity, would have retained their value? And isn’t it the role of the lender of last resort to facilitate that process by averting a liquidity panic to avoid economic meltdown?

Jenkins also says that moral hazard is not an aberration and can’t be eliminated. Governments should write a liquidity insurance policy for their financial systems in times of panic. These are part and parcel of sound financial systems. There is no substitute for an indiscriminate safety net in times of panic, he says. “Quite the contrary: if it threatened bank creditors with real losses (as it properly should), invoking resolution authority would only feed the panic.”

Fannie and Freddie facilitated for decades the funneling of credit to speculators and, in recent years, millions of non-credit worthy borrowers seeking to buy their first home in frothy markets. At the time, lender behavior was rational, using quasi-government entities to absorb the risk of lending during such bubbly times. In other words, Jenkins says, it’s bad public policy that was at the root of the crisis, and the Fed’s behavior as a safety net is appropriate. This situation was aggravated by the sentiment that everyone should own a home. While a noble goal, it is not financially achievable or prudent for 100% of the population.

I’d like to add my two cents’ worth to these comments. Not only do I agree with Jenkins, but, based upon this conclusion and recent history, the so called “bailout” money could have been better deployed for a more positive impact. One important benefit of TARP – restoring stability to the financial markets – could have been achieved by the Fed’s liquidity injections into the financial system, and by Treasury using the money to stabilize the housing and commercial real estate markets. Spending TARP to create stability achieved that purpose, but it also prolonged the life of “dead banks walking” and unnecessarily contributed to the on-going uncertainty of real estate markets which still seek the bottom. The Resolution Trust Corporation of twenty years ago did a solid job of stabilizing markets. Perhaps a similar structure would have been effective today as well.

Further, as panic spread and capital markets shut down or evaporated altogether, capital in the banking system was reduced dramatically through passing “paper” losses on loans, securities, collateral and goodwill, rather actual losses. Appraisals shifted from optimistic to a “mark-to-no-market” mode, and did not reflect intrinsic values, not to mention long-term values.
Losses were thus further magnified, creating a death spiral for many banks.

Treasury would have been better served by investing TARP funds in making markets in toxic real estate as originally planned, thus stabilizing the asset values on banks’ balance sheets, preventing fatal value write-downs for both loans and bank-originated securities (trust preferreds) and siphoning huge amounts of capital out of our system.

TARP did not help stimulate our economy, nor did it facilitate additional lending, as loan demand has been depressed in reflection of the economic slump. Instead, the free market has been seeking its own equilibrium, as it always does. Prices have plummeted in some markets and not so much in others. Buyers are returning to markets that have been priced to what they believe is the bottom. At this point, our economic problems are unemployment-driven, not real-estate value driven.

I am no economist, and I acknowledge this is a very complex situation. At the same time, we have always seen banks fueling the economy and leading its recovery. Beating us up is not going to help the US economic recovery. It will delay it instead.

Unemployment - Underemployment

2010-03-14T11:56:00.000-07:00

January’s unemployment rate in Napa County was 11.1%, up from a December 10.2%, and above the year-ago 8.2%. This compares with an unadjusted unemployment rate of 13.2% for California and 10.6% for the nation during the same period. This placed Napa County 10th best of the 58 counties in California, a change from its historical 4th or 5th best place.

We are also finally beginning to read more of the underemployment figures – though the BLS has been tracking this rate for over 15 years. February’s national underemployment was 16.8% up from 16.3% in January. Underemployment includes three classifications of persons - unemployed workers who are actively looking for work, involuntarily part-time workers who want full-time work but have had to settle for part-time hours, and marginally attached workers who want and are available for a job, but are not actively looking. Together, they provide a more comprehensive measure of slack in the labor market.

As unemployment is a lagging indicator, underemployment is probably even more of a lagging indicator – due to those in the above definition. This rate is also somewhat nebulous, is it is difficult to quantify. A recent Gallop poll has underemployment at about 20% - that means over 30 million Americans.

The underemployed tend to spend much less than their fully employed colleagues – 35 percent less, according to Gallup. This potentially costs the economy hundreds of millions of dollars every month. Using the 20% figure - an economy where 1 in 5 are underemployed and take one-fifth of spenders out of the economy: That has huge implications in terms of our ability to mount any kind of consumer recovery. Our economy is so dependent on consumer spending that until people get back out there buying, you won’t see things improve.

So how long until things improve? Anyone’s guess at this point – but for sure it will continue to be slow.

Article on - Vineyard Defaults Surge as Bargain Wines Hurt Napa

2010-03-14T10:55:00.000-07:00

The following article written by Dan Levy for Bloomberg and published in Business Week on March 8th - is floating around the Napa Valley. I'll post it here in case you haven't seen it. There is no question that we are in tough times - even potentially further exasperated by this weekend's news of the new pest - the Apple Moth infecting our vineyards. This time, we in the valley are prohibited in taking fruit out of the valley - versus the prior quarantines on imports into our valley. I've already heard many debates as to how real the following article is – both better or worse. I’m sure there will be more in the media in the coming weeks.

http://www.businessweek.com/news/2010-03-08/vineyard-defaults-surge-as-lost-land-values-undermine-napa-wine.html

By Dan Levy

March 8 (Bloomberg) -- In California’s Napa Valley, producer of the most expensive U.S. wines, 2010 may be a vintage year for foreclosures as the industry is squeezed by falling land values and a consumer shift to cheaper brands. As many as 10 wineries and vineyards in Napa will change hands in distressed sales or foreclosures this year and next, up from none in 2008, according to Silicon Valley Bank. In a bank survey of vintners, 7 percent called their finances “very weak” or “on life support.” “We have 250 vintner clients saying this downturn is the worst in 20 years,” Bill Stevens, manager of the bank’s wine division in St. Helena, California, said in an interview. “Anybody who was late to the party won’t have staying power.”

Land values in Napa, home to about 400 producers, have fallen 15 percent from the 2007 peak, driven in part by slumping demand for high-end wine, said Robert Nicholson, principal at International Wine Associates, a consulting and financing firm in Healdsburg, California. The decline makes it harder for owners to refinance mortgages, especially if the property is worth less than the loan. Napa winery and vineyard loan defaults rose fourfold to 18 in the year through January, according to San Diego-based research firm MDA DataQuick. In the survey by Silicon Valley Bank, whose clients are mostly high-end West Coast wineries, 71 percent of respondents said credit is harder to get. The bank didn’t attach names to its estimates or survey. The recession has set in motion a “secular change,” with budget-conscious consumers trading down to less expensive wines, said Peter Kaufman, managing partner at Pleasanton, California- based Bacchus Capital Management LLC, a private-equity fund that provides mezzanine financing to wineries.

Sales Fall
The dollar value of U.S. retail wine sales dropped 3.3 percent to $29 billion in 2009 after rising every year and almost tripling from 1991 through 2008, according to Gomberg, Fredrikson & Associates in Woodside, California. Though consumption increased 1.9 percent to 323 million cases last year, people are buying less expensive labels, the industry consultant said in a March 5 report. Sales of super-premium bottles priced more than $15 declined 10 percent last year, and those over $30, defined as ultra-premium, fell at least 15 percent, according to Rabobank Nederland NV, the Utrecht, Netherlands-based bank that finances agriculture businesses. Napa and neighboring Sonoma are the top U.S. producers of premium wine, the bank said.

Screaming Eagle
“No more is it about stocking wine cellars with 5,000 bottles of Screaming Eagle,” said Bacchus Capital’s Kaufman, referring to a Napa “cult cabernet” that can sell for $750 or more a bottle. “High-rollers are discovering that there are lots of drinkable $20 to $40 bottles of wine.” Kendall-Jackson, based in Santa Rosa, California, is the top-selling U.S. brand over $15 a bottle, said Eileen Fredrikson, partner at Gomberg Fredrikson. The “Franzia box,” a five-liter vessel that retails for about $8 from Livermore, California-based Wine Group LLC, is the most popular overall. Super-premium wineries are likely to bear the brunt of changing consumer habits, and lenders will pressure clients who can’t cover costs to “seek solutions before the loan goes into default,” Rabobank said in a January report. Cheaper imports from countries such as Chile, Argentina and Australia are cutting U.S. winery margins, according to Stephen Rannekleiv, lead analyst on the Rabobank report.

Grapes of Recession
“Consumers are looking at price point and saying that Napa is not the price they want to be buying at,” New York-based Rannekleiv said in an interview. “Wine prices drive grape prices drive land prices.” Bill Harlan, maker of Napa’s Harlan Estate Proprietary Red that counts four perfect ratings from widely followed critic Robert Parker, said he expects to see foreclosures mount. “No area is going to be unaffected by this financial meltdown,” he said in a telephone interview. Harlan, whose Oakville, California, winery is 60 miles (97 kilometers) north of San Francisco, has seen the distress up close. In December, he acquired 21 acres next door known as Diamond Oaks Winery from businessman Dinesh Maniar, owner of two separate Napa parcels that are facing foreclosure, according to county land records and documents in U.S. Bankruptcy Court in Santa Rosa, California. David Chandler, an attorney for Maniar, didn’t return calls seeking comment. Diamond Oaks lists a $35 bottle of pinot noir and a $30 cabernet sauvignon as “new products for March” on its Web site.

Few Deals
There have been few recent property deals because sellers are reluctant to accept the low bids they are seeing, said Tony Correia, an appraiser in Sonoma for Correia-Xavier Inc. More than 30 wineries are for sale in California, Oregon and Washington, the most ever, according to Rob McMillan, executive vice president and founder of the wine division of Silicon Valley Bank, a unit of SVB Financial Group in Santa Clara, California. The properties have too much debt, were new arrivals to the wine market or have owners who are looking to retire as competition rises and profit margins fall, he said. Some Napa land deals that were never publicly disclosed or confidentially recorded at the county assessor will unravel this year and in 2011, according to Vic Motto, chief executive officer of Global Wine Partners LLC, an investment bank and advisory firm in St. Helena that brokers property sales. He declined to identify which of the buyers may not be able to hold onto their properties. “There were heavily leveraged transactions that occurred that were private, not transparent, and there is no data to show that,” said Motto.

Valuing Land
Napa land values, the highest among U.S. wine regions, are based on wine appellation, or a property’s geographical boundary, and soil quality, according to Correia, the appraiser. On-premises wineries are also valued by production facility and capacity and proximity to main tourist thoroughfares, he said. Napa Valley runs about 30 miles from the city of Napa in the south to Calistoga in the north. Average prices are $150,000 to $200,000 an acre for a vineyard planted with red varietals such as cabernet sauvignon and $115,000 an acre for white grapes such as chardonnay, said Sean Maher, president of Maher Advisors Inc., a brokerage in St. Helena. The most desirable sites in Rutherford and Oakville can fetch $250,000 an acre, he said.

Napa Premium
Napa wine grapes have been the most expensive in California since the 1970s, said Terry Hall, a spokesman for the Napa Valley Vintners Association in St. Helena. Last year they cost an average $3,401 a ton, 56 percent more than second-place Sonoma grapes and more than double those from third-place Mendocino, a preliminary 2009 report from the state Department of Food and Agriculture shows. California produces 90 percent of all U.S. wine, according to the U.S. Tax and Trade Bureau in Washington. Mortgage defaults will also hit Napa residential parcels owned by hobbyists, or those who intend to produce 100 to 300 cases a year, said Deborah Steinthal, principal of Scion Advisors. In October, the Napa-based consultants forecast that “hundreds of properties will go into foreclosure.” That’s the scenario facing Sandra Sutherland, who bought a four-bedroom house and more than seven acres of chardonnay, merlot and pinot noir grapes for $2 million in 2005. She and her business partner haven’t made loan payments to Charlotte, North Carolina-based Bank of America Corp. since January 2009.

‘Blind Fools’
“We went in like blind fools,” Sutherland said. “We didn’t really expect to get the loan, but felt committed when we did.” Owners who have invested for years and managed land prudently should survive the tumult, said Harlan, who has produced 18 vintages since buying the property in 1984. The 2007 vintage of his flagship wine, the most recent, sells for $500 a bottle. “In the long run, those that don’t compromise the quality, manage their wines better and manage their land better will be fine,” he said. “We just need to make sure we get through the short run.”

JANET YELLEN NOMINATED AS FOMC VICE CHAIR

2010-03-14T10:25:00.001-07:00

I saw this article in the Banc Investment Daily - as published buy the Pacific Coast Banker's Bank on March 12th. I thought it gave a good perspective of Janet Yellen.

JANET YELLEN NOMINATED AS FOMC VICE CHAIR

Lots of people walking around think they have game, but the actual odds that a high school basketball player will be drafted by the NBA are 1 in 3,333. Now, we don't know the odds of getting the nod for the Vice Chair position at the FOMC, but they are surely higher. The good news is that President Obama will reportedly nominate Dr. Janet Yellen, who currently serves as San Francisco Federal Reserve Bank President. She is eminently qualified and a supporter of community banking.

By way of background, she is an economist by trade (is coincidentally married to Nobel prize-winning economist) and was a voting member of the FOMC in 2009. She is considered to be an inflation dove, which is someone who promotes monetary policies that favor low interest rates (as a means of encouraging consumer activity to spur growth within the economy) and are less worried about the effects low interest rates may have on inflation. Doves generally worry about unemployment more than higher interest rates. While this is a simple way to try and box Dr. Yellen's thinking up into a sound byte you will undoubtedly see repeated in the press, it is much too simple an explanation for the way we believe she will act as Vice Chair of the FOMC.

She is also plenty smart, having graduated summa cum laude from Brown University with a degree in economics in 1967. She then went on to get her Ph.D. in economics from Yale in 1971.

She has already had a great career that includes teaching (Harvard University, London School of Economics and Haas Business School); research (Massachusetts Institute of Technology, National Bureau of Economic Research) and advisory (Chair of the President's Council of Economic Advisors 1997 to 1999, Brookings Panel on Economic Activity, Congressional Budget Office). She has served on the Federal Open Market Committee in 2009, as well as 1994 to 1997 and has been the President of the San Francisco Fed since 2004.

Dr. Yellen will be focused on fixing the unemployment issue, which is a good thing if you ask us, since few seem to be really doing much on that front. She is also realistic, recently indicating in a speech that the US could continue to see slow employment growth, with an economy that will not operate at full potential until probably 2013. Dr. Yellen also stated in the same speech that full economic recovery isn't just the Fed's job and more will be needed, saying, "monetary policy can't give the same kick to the economy that it delivered in past recoveries."

We have had the pleasure of talking to her directly at various banking functions and can tell you that she is extremely bright, understands many of the issues facing community bankers and is both open and willing to listen. That is a good person in our humble opinion to have on the decision-making board of the Fed, because she truly seems to understand that small business hiring will come from small business lending - ultimately sparked by community banks in local towns and cities all over the country.

We are happy to see Dr. Yellen get nominated to a four-year term as the Fed's 2nd most powerful member, behind Mr. Bernanke himself. We expect the Senate will move quickly to confirm her for the position and know she will do a great job for the economy, small businesses and community bankers across the country. Dr. Yellen certainly has game.

The Value of Community Banking

2010-03-02T09:25:00.000-08:00

In late December, the Huffington Post ran an article about the strength of the community banking system in America. Noting that the community banks in America understood the local economy and would be leaders in the economic recovery – lending to small businesses - where the job growth would occur. In the article, it mentions a list of community banks, unfortunately, newer banks were not listed. However, our clients recognize that we are still well capitalized, have a clear understanding of the needs of our community and work to solve those needs. Here is the Huffington story – click on the video clip, which is mid-way through the article. It is a takeoff of the movie It’s a Wonderful Life, with Jimmy Stewart.
http://www.huffingtonpost.com/arianna-huffington/move-your-money-a-new-yea_b_406022.html

Last week, the Bay Area television station KTVU ran a similar story. (The story runs after the advertisement.)
http://www.ktvu.com/video/22678440/index.html

And then this past weekend, CBS News Sunday Morning Show ran the story.
http://www.cbsnews.com/stories/2010/02/28/sunday/main6253064.shtml?tag=cbsnewsTwoColUpperPromoArea

Here is the video of the CBS Sunday Morning show.
http://www.youtube.com/watch?v=uI1tqeuXy80

While I’m no George Bailey – we are here to be that community bank that works with our clients. Yes, banking regulators have tightened the lending parameters – but in spite of that, we are working with our community on the economic recovery here in the Napa Valley. Thank you for your support. And if you haven’t – then please “Move-Your-Money”.

Are bank's lending?

2010-02-24T14:49:00.000-08:00

Our industry can develop a bevy of statistics that exhibit that banks are lending again – to both large and small companies. But in reality, credit has definitely tightened and will remain so for some time. Bank regulators are seeing to that. I’m not bemoaning our regulators here – actually it goes beyond them – back to reality. We are moving back to more traditional lending – borrowers having the proper blend of equity and cash flow to support their borrowing needs – back to normality. The unfortunate situation is that real estate equity is minimal or non-existent. Over the past decade equity was not a pre-requisite to borrowing – one could obtain 100 % financing quite easily – no longer. And cash flow – with this recession – is typically based on projections – based on who knows when this economy will begin a sustained recovery. I do believe that there is consensus that the economy has bottomed. But we are in a much longer and flatter part of the “L” shaped recovery than ever anticipated. Some see some light at the end of the tunnel – but not a strong beam. Therefore bank lending will progress – but only as cash flow and real equity also progress.

Where are we in this Economy?

2010-02-21T10:27:00.000-08:00

From Saturday’s Wall Street Journal – a few interesting stories.

This week the Federal Reserve increased the discount rate by 0.50% - not quite to traditional levels of the variance from the fed funds rate - but a major shift from the past year or so. Does this signal the beginning of a gradual increase in rates? Consumer prices have only climbed 2.6% over the last year – signaling no rush to increase rates. Large companies and large financial institutions are back to profitability – while small business and financial institutions continue to struggle. Wal-Mart sees soft sales for the next couple quarters. Unemployment continues in the 10 to 12 % range, which doesn’t include those who have exhausted the use of their benefits, and the under-employed (who have taken lower paying jobs which don’t cover their needs or debt load). The length of the average unemployed is among historical levels.

What does all this mean? JOBS are STILL the KEY. Larger companies are fairing better – because they are not hiring. With the prolonged employment issues – consumption will continue to lag – which will cause employment to lag. So in short while the economy is poised to move forward – we are not there yet. There is still tremendous uncertainty causing the recovery to take its sweet time.

Washington and Sacramento need to both get beyond partisan politics and be participative in helping businesses solve the job issue. Hopefully, more politicians are beginning to realize that their jobs are on the line – unless they move forward and do their job.

Electronic Funds Transfer Act

2009-12-15T12:34:00.000-08:00

Written by Tom Ragusa, Vice President/Compliance Officer of Charter Oak Bank

General Overview
The recent rule passed under the Electronic Funds Transfer Act will have an affect on all Banks in regards to Overdraft and Overdraft Fees. Bank systems will need to be updated for opt in/opt out classification so accounts are handled properly. Customer will need to “Opt In” for us to pay an ATM transaction or Debit Card Transaction that overdraws an account. While the Bank has previously accepted these transactions and typically paid them for the customer, if the customer does not “Opt In”, these items will be declined at the time of the transaction and the customer will not be charged an Overdraft fee.

Giving to the Community

2009-11-25T15:59:00.000-08:00

Part of a community bank is being part of...the community! At Charter Oak Bank, we value our community, knowing the importance of giving back and being involved. Our employees are committed to be personally involved in one or more community organizations, and many have held leadership positions for years. Through this commitment, we now work with over 50 local non-profits, sit on 20 boards and provide over 3,500 hours of service to our community annually.We are passionate about what makes our community better and are always ready and willing to encourage our customers to get involved. A strong, healthy community is beneficial to all its members.

During the Holidays, we all seem to become more keenly aware of the needs of so many in our community. As part of our ongoing support of the community, we have placed food barrels in each of our branches to collect non-perishable food items for the Salvation Army Food Pantry. This holiday season, more than ever, we are in a state of significant need. We encourage you to stop by either of our branches to drop a can or two, some dry pasta or other items in the barrel. Every little bit helps, and together we can really make a difference in the lives of many of our friends and neighbors. We appreciate the opportunity to give back to the community in this and other ways throughout the year, and it is also gratifying to see the participation of so many of our employees, friends and customers.

As we reflect on the past year, Charter Oak Bank has been honored to support many local organizations - the breadth of which are listed on our website. A strong, healthy community is beneficial to all its members, and we are thankful to be part of a Napa Valley Community that really cares. Thanks to the many friends, customers and associates who also give so much to make this Valley such a fantastic place to live!

Happy Thanksgiving from all of us here at Charter Oak Bank...

Efficiency and Our Environment

2009-10-27T16:00:00.000-07:00

How can Charter Oak Bank and our clients be both green and efficient? While many of us value saving our planet and being environmentally conscious – we don’t always think of being green as either efficient or cost effective. Charter Oak Bank’s Remote Deposit Capture is just that. Many of our customers are now into their third year experiencing our Remote Deposit – being green, while saving money.

These customers are saving gas, paper, and time while making their bank deposit right in their respective offices. We even have a client with a branch in the state of Washington – and they too deposit to their account at Charter Oak Bank from their office in Washington. Funds get into client accounts faster. And should the postal mail be late – our system accepts on-line deposits up to 5:00pm – credited the same day. If you are a business client, and are not experiencing this environmental, efficient, and cost effective means of banking, please call one of our team members for a demonstration. Consumers – I would expect an industry-wide product for you in the next couple years.

A Thought From Warren Buffett

2009-10-26T16:07:00.000-07:00

A friend of mine sent me the following in an email, that was published in the Business Wire – and thus I give them the credits. I thought it was worth posting to the blog for an interesting perspective.

Billionaire investor Warren Buffett says the economy has passed its lowest point and, while recovering slowly, is clearly on the way back up. "I am not sure about exact quarters or anything of the sort. Who knows about next week or next month? “We made enormous progress since a year ago. We had a real panic. And if you didn’t panic, you didn’t understand what was going on,” Buffett told Business Wire in an interview.

Buffett credits the outgoing Bush administration for making the right moves in the fall of 2009 and into the transition to a new government to keep the financial system from completely collapsing. “While the governmental authorities malign things sometimes, they fortunately did some very right things, very important things. They did them properly, and they kept us from going over the cliff.”

He also said that, while problems remain, the basic capitalist system underneath is healthy and in no need of significant reform. “If you look at this country, we have gone through the Great Depression, we have gone through world wars, we have gone through civil war, and we have progressed like no country in the world. We have the right system,” Buffett said. “It doesn’t avoid all the problems, but it overcomes all the problems.”

Buffett said that he does not see consumer spending rebounding short term. He noted that the unemployment rate would like continue to be high, since job creation always lags a recovery.

While he welcomes financial reforms being made in the federal level, Buffett warned that government’s role, while important, is naturally limited by human nature.
“You can’t rule out human emotions. When people get greedy as a pack, strange things happen. When they get fearful as a pack, strange things happen,” he said.
“Rules will help us avoid some of the problems. They’ll help us modify some of the problems, but they won’t eliminate all future problems.”

As for stocks, Buffett declined to predict that they would be higher in a year, but was more positive about five to 10 years out.

Charter Oak Bank Financial Results

2009-10-26T16:01:00.000-07:00

As you continue to read, the economy continues to experience tough times. While the recession appears to have ended, the rise back to normality (whatever that is) will take some time. Due to financial turmoil with both consumers and businesses; the banking industry is also experiencing tough times. I must be frank and say that we at Charter Oak Bank will experience some loan losses from our clients. The good news is that we have a very diversified portfolio – significantly more so than most banks. For instance only 13% of our loans are in non-owner occupied commercial real estate, exhibiting proper loan diversity. And these loans are performing well. The problem banks have over 50% of their loans in this category.

We have also set aside loan reserves of almost 2% of our portfolio. This is to protect our capital of any unforeseen issues. Even with this reserve, Charter Oak Bank remains profitable – putting us among the upper tier of banks in California and nationally.

Our capital ratio is above 12%, with the definition of being in a well capitalized (best) position - anything above 10%. You should have confidence in your local bank – as most of our loans are made right here in the Napa Valley. And has been exhibited with our unemployment rate among other factors – our economy is in a better position than most of the state of California – similar with Charter Oak Banks’ loan portfolio.

Thank you for your continued support. We all will be working to make it through these tough times. And to help our current loan clients, we again will soon be offering a skip-a-payment program to support our borrowing clients with their cash flow needs.

Remote Deposit Capture

2009-10-18T15:57:00.000-07:00

Our team at Charter Oak Bank has a fabulous deposit product, one that fore-shadows the bank of the future. For quite a number of years, we as individuals could have our payroll check deposited directly into our checking account at the bank. And very large companies could transfer funds either by wire or ACH (automatic clearing house) transactions. But what about small businesses that still had to come into the bank everyday to make manual deposits?

Remote Deposit Capture eliminates the need to drive to your local bank - allowing the business owner the opportunity to deposit checks in their account - without leaving their offices. This is accomplished through computer automation teamed with scanning technology. Checks now can be deposited faster, after normal banking hours, with significant time savings. This product is also great for our environment - no gas and less paper. It also saves payroll dollars for the employer, as their staff does not need to leave the office. With this automation - copies of each deposited check are saved in the computer, and the business is notified faster of any returned items.

If you are a business and are not using Remote Deposit Capture - contact myself or one of my team. We have a large number of testimonials from happy clients who have been using this product for now a couple years. I would expect that a similar product in time will be available for individuals as well.

Napa County Unemployment Rate drops

2009-10-18T15:42:00.000-07:00

Local unemployment rates are released every third Friday of the month for the month previous. The rate for both California and Napa County dropped in September to 12.2% and 8.7% respectively, while the U.S. rate rose to 9.8%. Last month, Napa was at 9.1%, while a year ago at 5.0%. Napa County continues to be third best in the entire state of 58 counties, with Marin and Santa Barbara the only better.

Prognosis is that while this data and other looks better, perhaps it would be better to say - the fall has stopped. The local economy will continue to struggle with such a high unemployment rate affecting local purchases. Thus as business struggles, commercial real estate will be under increased pressure - adding to the bumpy, though slightly positive recovery. This recovery will be long and slow and well into 2010. In the meantime, we can all work to support each other.

Buy Local

2009-10-13T07:30:00.001-07:00

Lead story in yesterday's Napa Register - "Supervisors look for ways to keep government money here" - in other words "Buy Local". Well it is about time. The local chambers of commerce have been orchestrating a "buy-local" campaign for almost a year now. As this recession prolongs we need to do all we can to help our local merchants. You may read that the recession is ending - but with the continued rise in unemployment - our merchants are the ones who will continue to struggle well into 2010.

At Charter Oak Bank, we did a study of our purchase habits. And though we are not perfect (and some bank items can not be purchased locally), over 75% of both our dollar purchases and our vendors are local. And we are working to improve that even more. Nor am I. Though I purchased my car three years ago from a friend - he was not local. My next one will be.

And as Kate King reminds me - even making purchases at the box stores count as local - IF they are here in the valley. So please when you consider your next purchase - will it be here at home? Thank you.

Unemployment

2009-09-18T10:04:00.000-07:00

Unemployment rates continued to rise across all sectors in August. Rates nationwide, in California and Napa County each rose 0.3 percentage points August over July. Always looking for the silver lining - the good news is that Napa County continues to be (of the 58 counties in California) the third best county - i.e. the third lowest unemployment rate in the state (with Marin and Santa Barbara slightly lower).

Nationally, unemployment in August was 9.7%, with California at 12.2% and Napa County at 9.1%. This rise is expected at the end of most recessions.

Listening to our customers, reports continue to show that the bleeding has stopped. Though we are not out of the woods, "sales-wise" many businesses are not continuing to drop month over month. Yes, sales are not where they were a year ago - but are better than 6 months ago and last month. My informal survey includes many restaurants, hotels, and retailers. We are also seeing the turnaround and confidence in that our bank deposits are rising - a positive sign.

So times will continue to be tough through year-end, and we may continue to have a bumping recovery - but we can now say that we see the light at the end of the tunnel.

Inside the Beltway

2009-09-14T05:05:00.000-07:00

With a group of bankers from California, I visited our legislators in Washington, D.C. last week - bankers on the Hill so to speak. We met with the Department of Treasury, the Comptroller of the Currency, Chair of the FDIC, and a number of senators and congressmen. This was an opportunity to learn how they were dealing with the financial crisis, and for us to give our input on changes we felt necessary.

Relevant to the economy - though statistically the recession may be at (or near) the end, we expect a few serious bumps in the recovery. As real estate loan rates reset - the adjusted loans will be tough on the consumer. And commercial real estate is clearly not on solid footing. Also, unemployment will continue to rise at least through year-end - causing further issues with the actual consumer recovery. (Watch for the state and local unemployment numbers being published this coming Friday.)

The financial industry also still has a way to go to return to some form of stability. We need to have real solutions to the issues before us. The "too-big-to-fail" notion with large financial institutions is a fallacy. If they need to fail - then so be it. On the other hand as large institutions take on significant risk - they should also reserve more capital and be under tighter scrutiny. We need to have a better handle on the management of all financial institutions - i.e. their regulatory oversight. We saw great debate between the various regulators as to that solution - very territorial. As with the members of Congress, we need to get past this territorial squabbling - and come up with real solutions. That was my message. This is not a time for a dance - but time for serious action.

While I was in Washington, I was also fortunate to be present in the Gallery of the House of Representatives for the President's speech on health care before the Joint Session of Congress. A fabulous experience - but also a show of the degree of partisanship on both sides of the aisle. If we are to achieve solutions to any of the issues on the congressional plate - then again we need to have solution driven action, not political infighting.

Napa's Unemployment Rate

2009-08-24T16:22:00.000-07:00

Napa County's July unemployment rate at 8.8% was unchanged from the rate in June, while the state of California's rate rose half a point to 12.1%, and the nation was at 9.4%. Napa's rate was among the lowest in the state.

While this is still a high number, it shows the strength of our local area relevant to other counties. My discussions with hotelier's and restauranteurs also exhibit a leveling off, if not a slight rise in sales.

We have a ways to go in feeling the turn around of what the pundants call the end of the recession - but should be grateful for where we live and work.

Please continue to buy local and support our local businesses.

Health Care

2009-08-19T12:34:00.000-07:00

We have all been hearing about the Health Care Debate - throughout our country, as well as in Washington, DC. Healthcare is a critical and very large component of our economy - affecting each of us everyday in many ways.

This month Charter Oak Bank was notified that our monthly employee insurance premiums will go up 20%, on top of a similar rise last year. This will affect not only the bank, but each employee, as the bank covers 80% of each employee's premium and 50% of dependents. An employee with a family will have an additional burden of about $140.00 for their portion alone.

We also have a few employees with "pre-existing" conditions. Fortunately, these employees are covered while they work for Charter Oak Bank. But if they leave, retire or for whatever reason go elsewhere - unless employed in another group - most likely will not be able to obtain health coverage again. This just plain is not fair.

You may be aware of the Children's Health Initiative. Fortunately, we have a great program here in the Napa Valley. but we still have numerous children who do not have health insurance. Many employers do not cover dependents - and thus many uninsured children.

I'm just outlining a couple points above. Primarily I'm asking for you and everyone to get involved as we revamp out national and statewide health insurance systems. No matter which side of the isle you sit on - be part of the solution. Call Mike Thompson - give him your thoughts. Don't stop with Mike - call or write others involved in this process. I don't have a handle on all the solutions - but I think we can certainly agree that the system is broken and in need of major repair.

Credit Availability & the Economy

2009-08-11T06:55:00.001-07:00

The following is an email that I received yesterday and my response. I thought it would be good to post here.

Subject: Lending

Brian

I would be interested in your view of when banks and credit card companies are likely to start lending again in force. I hear the lack of available loans and restrictions on credit as a big reason consumers have stopped shopping (in addition to layoffs and reduced value of investments) and it has certainly affected the value of my real estate portfolio. I hear estimates of 6 months to a year from some economists, but wondered what you thought?

My response:

This is much longer answer – than I can give here – and would be happy to chat on the phone. In brief – the economy is going through a dramatic change. This is not just in credit availability, but also in overall spending habits. The new term is “Frugality is hip”, with greater discretion is spending.

Credit card availability (your clients’ source of credit) is definitely tightening – which I don’t see relaxing, if ever. The credit card companies were too loose in those standards and will now take significant losses in their credit card portfolios. Overall credit to businesses, housing, etc – is available – but again with tighter underwriting. For example, 80% real estate loans are available – but with validated source of income and current appraisals (unlike the sub-prime world). With the significant drop in real estate values – the most recent source of availability e.g. equity loans – is just not there. I can give you more details – but not a rosy picture when is comes to credit availability, because of tight underwriting standards.

The good news is that we have reached the bottom of the recession - I would say this month (which was the consensus projection of over a year ago) – and which will be announced/validated in October with the release of GDP and other numbers. As you’ve read, unemployment will continue to rise through year end – with California among the nationwide leaders. So the projection is that increased spending will occur in about spring of 2010. This is not an issue of credit availability, but more of consumer confidence and availability of money. Spending habits have changed. People are dropping down in their purchase habits. What I mean is that they are dropping down in level of restaurant, dropping down in price points on wine purchases, and taking a more conservative approach to discretionary purchases.

Another positive factor – as evidenced through this recession is the effects of “Staycation” on the Napa Valley. Staycation is where vacations and other trips are cancelled, and people stay local - spending their dollars here. That trip from San Francisco for a New York vacation is replaced by a weekend in the Napa Valley. Hotels and restaurants report that the drop in occupancy has leveled off, and they are now even seeing some (thought limited) increase in business.

This gives a quick snapshot, for which I can give greater detail on the phone or in person.

Best to you,
Brian

Unemployment & Underemployment

2009-07-17T08:11:00.000-07:00

Napa County's unemployment rate for the month of June was 8.8, a rise from last month's rate of 8.3%. This is still below the national rate of 9.5% and state of California rate of 11.6% - both of which also were increases. However, there are some major issues that need to be noted. As we've mentioned our recovery from this recession will be a long protracted recovery - in my belief the most protracted recovery since the thirties. We will experience a number of setbacks along the way.

While our local unemployment looks good, the issue of "Under-employment" needs consideration. Under-employed people do not appear in the unemployment numbers as they have taken either lower paying jobs or part-time jobs. Yet the income of most of this part of the workforce is still not able to cover living expenses and debt obligations. Until this sector can get back to their normal income expectations, they will continue to experience a very tight financial situation. Some quote the under-employed numbers as high as 1 in 5, which is 20% (or even 1 in 4 or 25%). This group needs greater attention.

Secondly, commercial real estate still has issues, as does consumer spending - which affects our retail industry. More non-profits will either consolidate or go out of business - leaving more of our vulnerable without critical services. These sectors of the economy will continue to have a slow recovery. Again, we are fortunate to live here in Napa, and in the North Bay. But we should also realize there are a number of people here that still are hurting financially and need our support.

We Have the Power

2009-07-10T05:08:00.000-07:00

As I’ve previously mentioned, it appears that we are nearing, or have reached the bottom of this recession. We see many indicators of the slow climb back up. Unemployment has dropped in Napa County for two months in a row. Hotel and restaurant business while still down, appears to have stemmed the decline and is showing some positive numbers, and the national economy also seems to making a turn for the better.

That said, we have the ability to make a bigger and faster difference here in our own community. What will have a major impact on our local economy is for you to join the Chamber of Commerce "You've Got the Power" drive to shop local. Rather than spend money out of town let's help the local businesses throughout our valley by buying locally. Local businesspeople live here and care about the community. The money you spend locally circulates more within the community, and most local businesses are big supporters of community schools and organizations. Even if you shop a chain store, make it a local one. Dollars spent locally help in so many ways, including paying the wages of local people who work at those businesses and keeping our friends and neighbors employed. I don’t need to tell you about the impact of healthy employment. Employed individuals will then spend locally – further helping our economy. This also helps generate tax revenues for our cities and county – helping forestall unemployment there as well.

So let's all do our part in helping Napa out of this recession...I look forward to seeing all of you shopping, dining, and enjoying all of what our local businesses have to offer. We Have the Power.

Bank Failures in Illinois & Texas

2009-07-03T11:35:00.000-07:00

You may have heard that the FDIC took over seven banks yesterday - in Illinois and Texas. I'm sure the continued failure of banks is of grave concern to many of you. In studying the prime reason of their failure, one will note the significant concentration of development and construction loans at those banks. This is also true of the other 45 banks that have been closed so far this year. And most of those banks are located in Illinois, Georgia, Florida, Texas, Michigan and Southern California. These are states which had a “boom” housing and commercial development phase – now going “bust” this year.

An additional factor of bank failure is the weakness of the respective local economies. For example, the Illinois banks are just over 200 miles from Detroit - the home of the automobile industry. As I've noted before, though it appears that we have reached the bottom of this recession, unemployment will continue to rise for a few months. Bank failures will also continue to rise - as some banks have depleted much of their capital positions with losses

What does that say for community banks here in the Napa Valley? Well for one, we have minimal construction here in the Napa Valley. You don’t see bare 2x4’s in the air around our valley. The Unemployment Rate for Napa County has dropped for the second month in a row, perhaps also signaling the bottom of the recession for us. And each of the community banks here is in a well capitalized position. This sets the stage for these banks to have positive momentum coming out of this recession. To further study our local banks financial position, you can examine bank “call reports”, which are filed quarterly with the FDIC.

State of California WARRANTS

2009-07-02T08:18:00.000-07:00

For our customers, Charter Oak Bank will cash certain State of California issued Registered Warrants (IOU’s). Each warrant will be subject to review and must have been received for services or goods, including payroll checks, and for non-profit customers that receive funding from the State. The Bank will not accept IOU’s that were issued for Tax Refunds or Unclaimed Property payments. Checks will be considered on a case by case basis.

Teamwork at COB

2009-06-30T10:22:00.000-07:00

I continue to be amazed and appreciative of the teamwork at Charter Oak Bank. Teamwork has been woven into the fabric of our culture here at the bank – and I think that is main reason our employees rate us year after year as one of the Best Places to Work in the North Bay. Internally, employees work to support each other not only in their jobs, but also to support each other when personal issues arise – be it an extended illness or just coverage on their job so the employee can take care of a family situation.

Externally, with our Napa Valley community - the spirit of volunteerism amongst the employees is extremely high. Last year Charter Oak Bank employees volunteered over 3,500 hours to our community, being involved in over 50 organizations. We recently joined together to help renovate an elderly woman’s home and worked a Saturday to help clean up around the river. Team Charter Oak Bank has really taken on the 2009 Relay for Life very seriously– hosting a BBQ to raise funds – and set a team goal of $7,500 to raise by the walk at the end of July.

What I enjoy best about this teamwork, is that by working together we get to know each other better – providing for a more congenial work environment – thus supporting Charter Oak Bank as one of the Best Places To Work.

You’ve heard the advertisement –
"Happy Employees Make For Happy Customers".

Napa County Unemployment Rate Drops

2009-06-19T12:46:00.000-07:00

The numbers are out, and Napa County’s unemployment rate dropped for the second month in a row. May’s rate was 8.3% versus 8.6% for April and 9.1% for March. California’s unemployment rate continued to climb to 11.5% for May, with the nation at 9.4%. This continues to show Napa County, while definitely feeling the effects of this recession, to be in a healthier position than much of the state of California and the rest of the country.

Receipts at hotels and restaurants, while not immune from this downturn, are beginning to even out – thanks in part to the “Staycations” of our Northern California residents. While home prices show some rise, foreclosures in the county also continue to rise, meaning we are still not out of the woods.

As we’ve been hearing and reading in the last few weeks, it does appear that this recession is at or near bottom – both locally and nationally. However, this does not mean it is over. The effects of the recession, compounded by the number of people still out of work will mean a slow and bumpy return to a positive economy. Consumers are spending less and it's predicted they will not rush back. Frugality will become hip – whatever that turns out to mean. And the current state of finances of the governmental agencies, states, schools, etc. will likely cause more layoffs, and more of slow consumer spending.

That said, I take the unemployment news as quite positive, with a dose of reality that we have a long road back.