I really like Bancorp South (BXS). Granted, I have to like them from afar, because they don’t have any branches in North Carolina.

This year, we ranked about 70 banks by an index formula that sought to identify and quantify the quality of a bank’s service to the community.  We graded the institutions on their ability to provide capital to low-income populations and to small business borrowers.

Bancorp South (BXS) did well on both scores.  They scored particularly well on business banking, but they were still able to demonstrate a fairly high level of mortgage lending for low-income borrowers and low-income neighborhoods.

Today, I’m going over their annual report.  True, the picture on the front is a bit over the top.  But, I like to see that they’ve actually had a fairly good year.  Shareholder equity increased  by 3.6 percent. Book value went up 2.6 percent.  They even managed to increase their dividend! They extended their stock repurchase program.

The picture is not all rosy.  Like almost all banks, they saw a drop in their net income and in their share prices.

One statistic stands out, though.  They indicate that 41 percent of their mortgage customers make their monthly payment in person, at a teller window.  That is just the kind of personal service that most banks have eliminated.  It’s too expensive, the reasoning goes, to provide face-to-face attention to customers.  Better to sell the loan and have a servicer take care of the payments.  Argghh.

Yet it makes so much sense.  What kind of accountability does it generate to have a teller see the same person, once a month, coming in to pay their mortgage?  I bet the answer is that it makes a big difference.  Customers know that if they don’t make a payment, that a real person will notice. Moreover, as they do make payments, it solidifies an identity grounded within the context of a personal relationship.  That has got to be something that reinforces responsible borrowing.

The confirmation of that vision is found in their rate of loan charge-offs.  In 2008, a bad year for most banks, BXS has a charge-off rate of just 0.4 percent.  Oh, and that was an increase from 0.14 percent in 2007 and 0.15 percent in 2006.  Most banks would dream of those kinds of numbers.

Clayton has produced a new manufactured home that should stimulate a lot of conversation about the viability of mh’s future.

The new “i-house” is both an aesthetic knockout and a legitimately green endeavor.  I would be surprised if the home is not snapped up by a whole new demographic of homebuyers.

This is significant because this product could expand the audience for manufactured housing.  It also might change perceptions surrounding the building practices.  Traditionally, manufactured housing has been a popular element among rural homeowners.  With that geography, an inference of a certain set of preferences is easily made.  Most of the homes have been perceived to be of relatively compromised quality, especially those built prior to the HUD code. Many would say that in the late 90s, that housing quality caught up with site-built standards.  Alternatively, some might argue that site-built slipped (with smaller 2 by 4′s, thinner walls, and more reliance on electric heating) to standards that are relatively equivalent to contemporary mh designs.

The i-house by Clayton, driven by design and green construction, could draw a new type of consumer to manufactured housing.

Either way, the new i-home is a break out.  Green design is more cost-efficient in the long-run, but often its up front costs present an obstacle to homebuyers.  It is similar to cars: often some of the poorest families are driving clunkers from the 70s.  Those cars are cheap to buy, but they need a lot of repairs and they use plenty of gas.

I like the i-house.  It uses big windows, tankless water heaters, low-e windows, and rainwater collectors.  Clayton says that the whole home can be maintained on just one dollar of energy per day.  Think how much energy this will save.  I suppose that many people living in the Southwest will find those features particularly relevant: rainwater comes in bursts but in general there is a lack of precipitation, and there is plenty of sun to brighten rooms.

Clayton must have chosen the name to connect with young consumers.  I-house is a great adaptation of Apple’s iphone, i-life, and i-tunes.  Did I forget ipod? If anything, Clayton has staked a claim on the name frontier.  Its a great move.

Clayton may soon be making some changes in its own corner of the world.

In spite of the fact that there are numerous signs about the return of our economy, there are also plenty of signs that we are not out of the woods.

My last points suggested that some anecdotal events (home sales in my neighborhood, the new work enjoyed by my contractor) point to a recovery.

Then again, its hard to ignore the macro picture.

State coffers, unable to print money in order to escape problems, tell the real story.

Sales tax revenues continue to drop. In California, sales tax revenues have dropped more than 50 percent year over year. Personal income taxes, which have fallen 43 percent, are following suit. Sales tax is just about as current of an indicator that can be found.  This ought to tell us something, namely that today is still very bad.

Unemployment is still increasing.

And those bank stress tests are really more discouraging than the market appears to understand. We know that they were designed to inspire investor confidence.  We also know that the Treasury let banks negotiate stress test results.

Knowing that, are we supposed to feel good that Bank of America needs $33.9 billion?

I get a kick out of that.  It is just like grading at the private universities where many of these bankers have come from. A grade has become only the starting round of a longer process of negotiation.

Nonetheless, people ought to be a bit more hesitant before jumping on the bandwagon.  Earnings don’t justify more gains.

I’ve got a feeling that we might be out of the recession.  Not because I’m reading the Wall Street Journal.  In fact, that would probably give me a different signal – GM is faltering, AIG is years from coming back, and unemployment is increasing (although at a slower rate.)

In spite of all of those macro issues, I’m seeing some real life stories that lead me to think otherwise.

Homes in my neighborhood selling again.  On my block, two homes went under contract this week.  One had been on the market for less than two weeks.  The other had spent perhaps 6 weeks up for sale.

More significantly, at least to me, is that my friend James is busy again.  James is a contractor who has done some work for me in the past.  He is officially a brick mason, but he can do just about any job.  I hired him to build a retaining wall for our home.  He also did some landscaping and some moving.

James probably gets most of his business from investors – he tends to be lax with his painting crews and he takes some shortcuts with his large power tools.  He’s always underpriced. He’s got great social capital.  He can take out his cell phone and dial ten guys who’ll work all day in the heat for $50 bucks, a few Nabs, and a six-pack when the sun sets.

James spent the last three boom years getting his financial house in order.  He paid off all of his debt on his equipment.  He paid off the mortgage on his house and the note on his Cadillac Escalade.

In early summer of 2008, he started to run out of work.  It was so bad that he was calling me every two weeks to see if I had anything.

“I’ve got some tuition to pay,” and my time is running out.

The recession didn’t hit for four or five months.  Lehman Brothers blew up in September.  I should have paid attention of James back in June and reoriented my portfolio.  Too bad.

Now James is back.

“I am working so hired that I am starting to feel sick,” he said the other day.

I wish that North Carolina would hear stories like those of my friend James.  We are about to legislate some huge subsidies for construction workers.

Often, people pass off the seeming lack of logic concerning the use of refund anticipation loans as evidence that the poor make poor decisions, or that they fail to understand the time value of money.

When described by academics, there’s even a name for people who exhibit this kind of decision-making: they are individuals with a “high discount rate.”  What this means is that the poor, in this example, value money in the present greatly.  They would take a dollar today over a much higher amount in the future.

The price of a RAL, where an APR can be over 200 percent, infers a very high discount rate.  We are talking about people who might take $1500 tomorrow (you have to wait one day to get your refund with a RAL), rather than waiting to get $1700 in about ten days.

I think the mechanics of a RAL tell us that this academic description of how the poor are making decisions is a little bit off the mark.

Borrowers who get RALs avoid paying for their tax preparation services out of pocket. It might cost them $150 otherwise to get taxes done at one of the mainstream franchise tax prep services. That can be a lot of money to a person trying to support a household on a minimum wage salary.

Here’s how the conversation might go:

Tax prep guy: Your return is ready.  You are going to get $1,700 back.  Do you want to pay me now, or in two weeks?  If you pay me later, I’ll just take it out of your refund.  It’s really easy.

RAL candidate: Uh, that sounds pretty simple to me.  I’ll pay you later.

Let’s assume that the RAL candidate is operating with a good understanding of how much a RAL is going to cost.  That is a big assumption, considering how clear it is that many people do not have a strong financial education. In that somewhat optimistic scenario, the RAL applicant might realize that it’s a very costly convenience to get the RAL.  That person might have explored options for credit to be had elsewhere.

That is the rub.  Because in the most optimistic scenario, what this tells us is that there is little recourse to find credit elsewhere for these poor consumers.  It reflects very poorly on our credit providers.  The only loan product that could be more expensive might be a payday loan.  Even credit cards would be far better – suggesting that for many of these consumers, credit cards are out of reach.

Looking at the RAL decision from a less rosy viewpoint will lead you to an even darker conclusion.  Then, the RAL is going to someone who does not understand the full implications of their choice.  That points to a lack of transparency. It’s a situation that borders on coercion.

What is revealed is a situation that is aptly characterized as extortionate.

Let’s play this out in the context of another product, almost as ubiquitous as cash and definitely something that you would have a “high discount rate” for in the event that you were caught without any of it.

Imagine if you ran out of gas.  The gas in this case represents cash.

You walk to the gas station.

The attendant notices that you are on foot.  He says, “gee, I just raised the price on my gas.  Today, my gas is $20 a gallon.  Sorry.  I think I will have gas in two weeks for $1.99.  Do you still want some fuel?”

Oh, yeah, that would be irritating.

But then the guy behind the counter goes on.  “Gee,” he says, “I’d be happy to pump your gas for you right now.”

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