Local bankers say it’s ‘business as usual’ here
by Marianne Morf
As the nation anxiously watches the turbulent financial markets, local bankers calmly say it’s “business as usual” here.
“There’s lots of nervousness and anxiety out there-- and we can’t pretend it isn’t real, but the truth is banking-- and community banking-- remain safe,” said Mark Hewitt, president/CEO of Clear Lake Bank & Trust.
Tim Esbeck, community president at Manufacturer’s Bank & Trust in Clear Lake agreed.
“I encourage people who are worried about their finances to come in and visit. I think they will feel better when they understand how safe their bank accounts are. No one’s going to lose a dime with their money in the bank.”
“We’re the custodian of peoples’ money and we take that very seriously,” said Kent Thoe, community bank executive for Bank of America in Clear Lake. “We invite people to come in and visit so we can find out what’s best for their needs.”
Each of the men pointed to the strengthening of the Federal Deposit Insurance Corporation (FDIC) as a positive coming out of these difficult economic times. Monday, the FDIC limit was temporarily raised from $100,000 to $250,000.
“The FDIC is the mother of all guarantees,” pointed out Hewitt, who earlier this year was named to the Federal Reserve Board of Chicago. “I feel very good that the Federal Reserve is using every tool available.”
Congress created the FDIC in 1933 to restore public confidence in the nation’s banking system. The FDIC insures deposits, now up to $250,000 per account. The bankers pointed out that a couple’s deposits could be insured for up to $750,000 provided they each held an account in their own names, and one joint account.
The leaders at CLB&T and MBT both said their performance is strong this year and say the current volatile markets are rooted in sub-prime lending which their institutions do not practice. In many cases, sub-prime loans for homes and real estate were granted to borrowers who usually had no down payment, low credit scores and insufficient income to pay back a loan. The lender and borrowers were counting on the fact that the value of real estate would continue to rise. When that stopped, and prices were out of whack, the property owner could not afford to pay the loan and may have owed more than the property was worth. Sub-prime lenders collapsed under the weight of foreclosed properties.
Banks are much more regulated than investment and insurance industries, local bankers explained.
Bank of America is the largest bank in the country and does have investment divisions. However, the bank has balanced assets and was never over leveraged, said Thoe.
“We take pride in being conservative and making good quality loans to quality borrowers,” said Esbeck. “Over 99 percent of our loans are also serviced locally, which is very different from the mortgage brokers who sell the loans off and don’t get caught holding the bad loan.”
“We don’t see loans being made to those who can’t afford them too much here,” said Hewitt. “But that’s what happened in big urban markets. CLB&T has never been involved in that type of lending. We are not tightening our lending standards.”
“We’re making loans as normal. We don’t engage in risky lending practices,” added Esbeck.
Thoe said he believes lending criteria established by Bank of America are tightening. “The criteria is changing to be more conservative, which I believe will make for a stronger financial institution.”
Each man, while not openly supportive of the federal government’s bail-out plan, said they think the action will help to stabilize the economy.
“I’m hopeful this will at least stem the tide,” said Esbeck. “I hope it stabilizes things. But locally, it’s business as usual.”
