Smaller banks provide stability, counseling for jittery customers.
While customers at IndyBank are lining up a’la “It’s A Wonderful Life,” to get their money and other big names in the banking industry like Washington Mutual, Wachovia and Bank of America being watched carefully, depositors are understandably a nervous bunch.
Smaller banks are finding themselves enjoying unusual prosperity, spending time reassuring the public and telling their customers that there is no need to be concerned with their investments in the moderately-sized institutions.
“We’re a small bank that is a conservative lender and really take pains to make sure to do the right thing,” said Kris Hough, Vice President and Regional Manager of the Santa Clarita Valley branch of Santa Clara Valley Bank. “Every bank is suffering, our stock is down, all bank stocks are down, but you’re not going to have the safety issues if you have sound business practices.
“Right now the financial industry is so impacted, but the beauty of a small bank is that we don’t do mortgages, so we never did any sub-prime mortgages. Our bank is doing better than we’ve ever done right now.”
“We’re not as impacted as some others,” she continued. “We’ve put a stop gap in place as we’re buying our stock back, which maintains the shareholder value. Not everybody can do that, especially if you’re taking losses in the housing industry.”
Hough said that when the bank formed 10 years ago, the founders made a conscious decision to avoid mortgage loans.
“There’s a lot involved in doing mortgage loans,” Hough said. “Ours was more of a financial decision. You have to hire a lot of experts and put a lot of compliance in place. It’s a different kind of lending. So we made a conscious decision to focus on small business and business in general. Just as it went along, it began to make more and more sense.”
Hough said that their bank is seeing some customer migration from larger banks and says she personally spends a lot of time counseling their own customers about the state of the banking industry.
“We’re getting tons and tons of inquiries and easing people’s mind about banking in general. I’ve been spending a lot of time telling people how to check the regulatory websites and giving them information on how to check out the financial health of a bank.
Hough recommends www.bauerfinancial.com, which lists criteria for its ratings on the website and will give information such as the bank’s assets and if they are taking losses. If a bank only has two or three stars, there are problems.”
She also recommends checking with the FDIC (Federal Deposit Insurance Corporation) to see if their assets are insured, they can also get a printed report on their protections from that website (www.fdic.gov)