First National Bank reacts to national crisis, lays off 15

Even Olathe isn’t immune to the current financial crisis.

First National Bank of Olathe laid off 15 employees Sept. 15. It was the same day Wall Street investment bank Lehman Brothers, with $60 million in bad real estate holdings, filed for Chapter 11 bankruptcy, and Merrill Lynch was sold to Bank of America Corp. for $50 billion.

The next day, insurance giant American International Group, Inc. borrowed $85 million from the Federal Reserve, giving the government an 80 percent stake in the company.

Just more than a week before, government-sponsored mortgage lenders Fannie Mae and Freddie Mac, with a combined $5 trillion in mortgages, were taken over by the federal government for $200 billion.

Investment bank Bear Stearns was sold in March to JPMorgan Chase for $30 million — a loan it obtained from the Federal Reserve to make the purchase. Late Thursday, JPMorgan Chase bought Washington Mutual for $1.9 million.

And Friday, Congress was still negotiating a $700 billion bailout of the nation’s financial system.

“We’re just reacting to the economic realities of the markets today and just trying to get our expenses in line and make sure the bank remains strong as we have for the past 121 years...” said Brian Roby, president of First National Bank of Olathe, on Thursday. “We’re just taking steps to make sure the bank stays safe and sound. That’s what our customers expect, and that’s what we’re doing.”

Roby said that despite the slowdown in the local housing market, which has affected some of the bank’s customers (homebuilders whose developed properties are selling slowly), losses from loans are only slightly higher than the bank’s historical averages.

“That’s an area where obviously our impact here in the Midwest and Johnson County isn’t very significant compared with other parts of the country, but we still have some of those problems,” he said.

First National, with assets totaling more than $1.05 billion, has never experienced a quarterly loss in its history, Roby said, and he doesn’t expect that to happen this year.

Chuck Stones, president of the Kansas Bankers Association, an advocacy group for banks in the state, said he’s not aware of any other banks in the Kansas City metropolitan area that have laid off employees in response to the recent economic downturn. He added that he wouldn’t likely know that anyway.

Stones said most people think the Midwest is isolated from the subprime mortgage crisis because those loans weren’t granted in Kansas, but that doesn’t mean local banks aren’t affected. The subprime mortgage crisis negatively affected the economy, and that’s what’s affecting Kansas banks.

“Banks are in the business of lending money to businesses and people,” Stones said. “Any downturn in the economy of any kind affects everybody.”

He said it’s a trickle-down effect from the individuals who can’t pay their loans to those who need additional loans. It all comes back to the bank.

“Banks are always affected by economic cycles,” Stones said.

The 15 individuals laid off by First National came from all levels of the organization, Roby said, and accounted for less than 8 percent of its workforce. He said the bank has no additional plans for future reductions.

“In fact, we’ve told our staff that very clearly,” Roby said. “One of the reasons we did it all at once was because we just wanted to make those adjustments and react to what we see as a slower economic environment in the next few years.

“We hope it’s shorter than that, but we’ve been preparing for the worst. We hope we never have to do it again in our history.”