Thursday, October 2, 2008
No banking crisis here
By SUE WATSON
With much being said in Washington about the condition of the financial markets, local bankers last week said there is nothing to worry about in the short term.
Steve Gresham, president of the Bank of Holly Springs, explained how most community banks operate in the county and how his bank operates.
“With all the losses and banks having trouble (nationally) we’ve stayed out of what the other banks have done,” he said. “We have no Freddie Mac or Fannie Mae preferred stock.”
Bank of Holly Springs keeps most of its lending local and has stayed away from subprime mortages, he said.
“I feel like most of the community banks across the country have done the same,” Gresham said. “We stick with basic banking and are a lot more conservative. Even with all the losses across the country being reported, we have remained profitable.”
Gresham said some customers want assurance that their savings are safe. He said while FDIC insurance covers individual accounts up to $100,000, a family of four is covered for up to $2 million provided the accounts are structured correctly.
Customers who are not sure about FDIC insurance can check with their banker for a better understanding of how the insurance works, he said.
Tracy Davidson, president of Citizens Bank, said he feels like most local banks operate within the local area. He said only a few people have called to ask questions about the security of their savings and both wanted assurance about FDIC insurance protection on their accounts.
In general, customers are not showing him much anxiety about what is being called a banking crisis in Washington, he said.
“Your local banks operate in the communities they know and with people they know well and know best; I think it is a benefit,” Davidson said. “I think that’s the advantage of community banking. I think the banks are willing to lend money to qualified borrowers. That’s what we do here. Making qualified loans is the key.”
That translates into lending to those who have satisfactory credit and income, he said.
“Locally, our credit is sound and we have a good banking environment,” Davidson said. “There has been very little change locally as far as loans and extending credit.
“A community bank’s loan portfolio reflects the make-up of the community,” he said. “If anyone has concerns, if they should talk to their banker, I think they will be vastly pleased. I am surprised we have not had as many calls as expected.”
Greg Taylor, president of Merchants & Farmers Bank, said there is much misunderstanding about the financial institution crisis and talk about what is going on in Washington.
“The stories you are reading or hearing about in New York are about investment banks,” he said. “Basically, investment banks do not accept deposits. They are a kind of brokerage house and they buy mortgage loans and sell packaged loans in order to generate money. They have to sell off of a package of loans in order to make money to buy other mortgages (loans).”
In order for investment banks to make money they have to be continually selling, he said.
“The way they make money is by charging a fee that they charge for the transaction,” Taylor said. “Community banks like us generally do not sell any of our loans. We service all our loans.”
“Most community banks cannot afford to have a mortgage department because it is too expensive to operate,” he said. “Your ATMs, your checking, your whole system is working fine. Any withdrawal from a savings or checking account or CD is not affected whatsoever.”
Taylor said the local economy is doing fine.
“There have been some layoffs, but it is business as usual every day here,” he said. “We encourage people to call their banker if they have any questions at all.”
Taylor said a few M&F customers have called about interest rates, and friends will ask how the local banks are doing.
But he has not seen any panic, he said.
“I just think everything we are seeing in the news now is being called a bank, but we are all financial institutions of different types and these institutions on the news are a different type of financial institution than community banks,” Taylor said.
First State Bank president Jim Crell agreed.
“Many of these problems we are reading about on the national level are not trickling down to the local level here in Marshall County,” he said. “Although new home purchases and residential construction starts are declining nationally, locally we are seeing some new construction, and home purchases are picking up slightly. Demand seems to be level, especially in the northern part of the county. We are not feeling the severity of the repercussions other markets are currently experiencing.”
Local retail starts have been helping the local economy grow, Crell said. He cited the start-up of some new businesses in the area including a new hair salon and a couple of new restaurant openings, including Goodfella’s Bar and Grill in Holly Springs and the Slayden Travel Center which recently opened on Highway 72.
Local efforts are paying off with regard to new businesses in Holly Springs and Marshall County, Crell said, citing the efforts of the Holly Springs Chamber of Commerce under the direction of Amy Heaton and the Holly Springs Tourism Bureau headed by Stephanie Movre. He said local efforts such as these have helped flourish the local economy and have given the local banking industry a boost.
T.J. Vanzant with First State added that the local banks tend to operate conservatively in terms of assuring loans are solid from a banking standpoint.
“We have a responsibility to our shareholders and the community as a whole to ensure they will always have a safe place to deposit their money and conduct any and all financial transactions that may arise,” he said.
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