Signs of Life :: Community Banks Weathering the Storm
Community Banks Provide Safe Haven in Economic Storm
|“Community Banks may not be “too big to fail,” but they are too important to be ignored!”|
As the financial crisis continues, many people are turning away from the large corporate banks that have been targeted for government capital injection and bailout—and placing their money in community banks. In an informal survey released September 22, 36 percent of Independent Community Bankers of America (ICBA) members reported an increase in deposits.
Of the roughly 8,500 bank charters in the United States, 8,000 are held by community banks, which tend to be locally managed, cover relatively small geographical areas, and have under $1 billion in capital.
“The overwhelming message is that community banks didn’t have anything to do with the mess on Wall Street,” said Steve Verdier, senior vice president and director of congressional affairs at ICBA. “We made commonsense loans that people could pay back. The last thing that community bankers want to do is make a loan that is bad for the bank, the people, and the community.”
Community banks were attracting a growing number of customers even before the crash. ICBA reports that over the last three quarters, outstanding mortgage loans at community banks grew at an average of over 2 percent per quarter, compared to negligible growth for the industry overall. In the second quarter of 2008, the growth of commercial and industrial loans at community banks was nearly three times that of the overall industry, at around 3 percent.
As corporate banks continue to look shaky, community banks are an increasingly appealing option. In addition to providing FDIC deposit insurance, offered by all U.S. banks, community banks foster economic security for their entire communities because deposits are kept local.
“We know who we are lending to. We know the local economy. We know the house we’re lending on. If someone gets into trouble, we work with them,” says Jim Brown, president of Bank of Bennington in Vermont. With $250 million in capital and deposits up 20 percent over 2007, The Bank of Bennington is coming off the best year in its 91-year history, Brown reports.
—Anne Moore Odell is a freelance writer based in Brattleboro, VT.
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