Local banks appear to be weathering economic storm

September 30, 2008|By JOSHUA BOWMAN

WASHINGTON COUNTY -- Problems on Wall Street that have brought some national banks to their knees aren't affecting local banks in the same way, several banking officials said Monday.

Debts from adjustable-rate mortgages have spurred large, national banks like Washington Mutual and Wachovia to sell parts of their operations.

But state banks, by and large, have not invested in those markets, said Alison Tavik, director of communications for the Maryland Bankers Association.

"Overall, Maryland banks are not players in the subprime or high-risk lending markets. There's been very little exposure to so-called toxic loans," Tavik said.

Michael E. Hough, president and CEO of Susquehanna Bank, said he has taken several calls over the last few weeks from customers concerned about their investments.


He said he is assuring customers that Susquehanna Bank is fine.

"We're very well capitalized. We never kept subprime loans, and that's what's bringing other banks down," Hough said.

He said commercial lending requests are "higher than ever" and said deposits have grown as well.

"We've got more cash coming in because people are scared of their mutual funds," Hough said.

"The door still says 'open for business,'" said Tim Henry, CEO of Centra Bank.

While Henry acknowledged that the consumer and commercial markets have "softened" a little, he said business has continued normally.

"It appears that it's the subprime that got these banks in the majority of their trouble. Local banks are fortunate in that sense," Henry said.

Still, the problems on Wall Street are likely to make more careful lenders of local banks, officials said.

"It's just like you with your own wallet. If things are uncertain, you tend to be more careful with how you spend or invest. It's the same with any bank in town," Henry said. "I don't think stockholders or anyone else would want to see us being foolhardy."

Tavik said lending standards have adjusted everywhere due to problems on Wall Street.

"For consumers, I think there is an expectation that that would happen," Tavik said.

Hough said Susquehanna Bank has become "more selective" in its loans.

"It's going to happen, especially as you hear about other banks tightening standards ... you don't have all the money in the world," Hough said.

Tavik said that people should be confident depositing money at their FDIC-insured local bank. She said the "vast majority" of Maryland banks are "well-capitalized," which is the highest designation banks can receive from regulators.

"Local banks continue to be a safe place," Tavik said.

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