After an Era of Excess, Where Do We Go Next?

A Conversation with Tim Lawson, Wealth Management Advisor

Q. Tim, what are people asking you about now?
A. The main thing they want to know is if their money is safe. For those who are not participating in the stock market, and have their money in FDIC accounts, that money is safe.
Q. What about those who do have money invested in the stock market, what are their concerns?
A. They want to know if they should sell now, or if it is too late. Our general advice is that it is too late to sell and it may be too early to buy. There is a lot of uncertainty about how government intervention will play out. We have these rallies, and it can look like the market is coming back, but we may not have hit the real bottom yet.
Q. For people who have lost their jobs, might they be forced to sell some of their stocks or mutual funds?
A. We have to look at their overall situation. Do they have an emergency fund? What is their debt situation? If they don't really need this money right now, it would be better to ride this out. Of course if they are in dire straights they may have to liquidate their stock market investments.
Q. What about people who are within a few years of retiring?
A. Again we have to look at the whole situation. Do they have a mortgage? How far away from being able to draw Social Security benefits are they? Do they have a pension? If they have mortgage debt and no pension, they may have to take some money out of the market.
Some won't be able to fully retire; they will have to work longer.
Q. What changes do you see in how people will manage their money going forward?
A. I think a generation may not be in the stock market after this, after all the difficulties. Wall Street as we have known it in the last 20 years is gone. There will be less appetite for debt, and more saving. Already we as a country have gone from a negative savings rate to a 5% savings rate. Investing is not as easy as it used to be. There are so many factors that weren't factors to consider 10 years ago, like China for instance, and the government's role. It's not just a matter of buying a mutual fund, you have to do your homework.
Q. It sounds like you're seeing this as a long term adjustment, not a matter of returning to "normal" in a year or two.
A. That's right. I think we are entering an age of frugality. People who wanted their kids to go to a private university may think about sending them to community college and then maybe a state university. We may see more multi-generational households, parents and children and grandchildren all living together.
Q. In the long haul, is this a change for the better?
A. I think so, yes. The excesses of the last several years have to be wiped out. A contraction like we are having cleans out all the bad risk. It's a big adjustment for a lot of people, but we will be healthier for it.

This Challenging
Economy:
Comments from
CEO Scott Bauer

Round-the-clock news coverage of the national credit crisis and the government's response - the TARP program - have raised many questions in our customers' minds. I want you to know exactly where Southern Community stands.

Southern Community applied for and received $43 million from the TARP Capital Purchase program late last year. At the time, the program was geared to healthy financial institutions that could be expected to weather the recession. The idea behind the program was that the Treasury would invest capital in strong banks to enable them to continue making loans and provide assistance to their customers.

This program was good for us because traditional sources of capital had disappeared, and these funds from the Treasury were available to us at an excellent rate. We have used the money as intended, to continue to grow and make loans. As of February 25 we have closed 428 new loans for a total of $47.7 million since we received the TARP funds on December 5, 2008. Our 2009 budget calls for continuing loan growth.

When you hear about troubled banks and bailouts, please know that your bank is not in that group or situation. We have money to lend. We are on track with bringing in new customers and new accounts. We are introducing new products and services, as planned.

Your accounts with us are insured by the FDIC under their current limits. We are well-capitalized and liquid. Our capital ratios easily exceed regulatory requirements for a well-capitalized institution.

We have always maintained an open door policy at Southern Community. If you ever have questions, please know that you may call me or anyone at the bank directly at any time. Thank you for your business.