The financial skies aren’t cloudy for all banks — small, locally-based banks said they’re doing well and are even seeing small increases in deposits from investors fleeing the shakier, larger banks.
Spared a heavy blow when the subprime mortgage market completely failed last summer, many of the Baltimore area’s community banks have weathered the last month fairly well, thanks to middle-of-the-road lending practices and prudent management.
“We never, underline never, engaged in the toxic lending practices that brought down these larger banks,” said Richard Lerner, chairman and CEO of BankAnnapolis, which has seven branches in the Annapolis area. “Like most community banks we’ve never done a subprime mortgage, we wouldn’t know one if we saw one.”
A brutal month on Wall Street saw all of its premier investment banks either merge with other firms or begin retail banking operations to stay afloat. This week, a battle broke out over control of Wachovia Bank, with an initial offer by Citigroup countered by Wells Fargo.
While not all smaller banks are in equally strong positions, Jim Sinegal of Chicago-based investment research firm Morningstar said the economic chaos helps most of those institutions.
“It benefits the smaller banks regardless of how they’re doing because the big banks are the ones in the news,” Sinegal said. “When people see those names, they think, ‘My smaller bank must be safer.’”
But some banks have gotten wise to the shift and are asking loan-seekers to do more business with the bank, discouraging investors from cherry-picking small banks that are still willing to lend.
“In other words, if they bank with someone else and they’re not going to help them with their needs, and they come to us, we’re willing to accommodate them, as long as they’re willing to be more of a customer with us,” said Mike Galeone, executive vice-president with The Columbia Bank.
As much as they’ve had to hold investors’ hands and reassure them of the bank’s strong position, Galeone said bank leaders have also had to educate their own employees about the current financial crisis.
“There are a number of things that can be hard to process if you’re an internal employee,” he said. “But we’ve coached them, we’ve had a lot of conversations.”
