News

Local banks stand strong during economic turmoil

Print this story | Email this story

The last few weeks have been a scary time from an economic and financial standpoint as stocks continue to drop. After the House of Representatives rejected a plan to bail out the companies in trouble, the Dow Jones Industrial Average dropped nearly 800 points - the biggest single-day drop in U.S. history.

Even with the financial crisis happening nationally, local banks in the area are still going strong.

National banks have suffered devastation recently. Last week, Washington Mutual went under and the federal government sold it to JPMorgan Chase; this week, Wachovia was sold to Citibank. While big banks are taking a hit, small community banks are seeing little, if any, change.

“Our business has been as usual,” said Jerry Rose, president of the Cedar Park and Liberty Hill branches of Prosperity Bank. “At a local level, I have not seen anything of the crisis that is happening worldwide or nationwide.”

Rose believes the good situation for the community banks is attributed to good lending practices. “Customers are coming to us with good projects and cash flow and the ability to repay,” he said.

Jon E. Sloan, president of First Texas Bank Round Rock said there has been very little effect on his bank. “We are not seeing significant adverse effects. Loan conditions are good here and the banks have money to lend,” he said.

Austin Telco Federal Credit Union continues to thrive as well, said Sid Lundy, vice president of marketing and business development. “It hasn't really affected us because we have very conservative lending standards,” he said.

Leander resident Paul Johnson, an Austin Telco customer, said he isn't worried at all.

Johnson uses a community bank locally and another in Branson, Mo. - where he and his wife live for part of the year - because of their more personal service and attention,. Now he sees another reason to stay with them.

“It's safer here,” he said. “The local banks are not in any jeopardy.”

The only real change local banks in the community have seen is more people coming to them. “We've had an influx of deposits because we're seen as a pretty strong bank,” Sloan said. “People are moving money from the stock market and weaker banks because [they're] looking for safety.”

Lundy said they are also seeing some new money come in from bigger banks that are struggling.

“The place for your money, I think, is the locally-owned financial institutions,” he said.

While the financial crisis isn't affecting community banks much, the long term effects of the crisis could have an impact. Rose said banks will have to practice due diligence when providing residential or commercial loans.

“As a community bank, the concern that we may face is significantly more regulations for misdeeds done that community banks didn't participate in at all,” Sloan said.

He hopes the bigger banks won't gain more of a competitive edge once everything is sorted out.

Local banks are trying to let customers know everything is OK. Prosperity Bank has booklets for customers with answers to common questions, while Austin Telco has released a statement on their website.

The only other change for banks in the community is the abundance of questions they're being asked from customers. “I spend 60 to 70 percent of my time fielding questions about the soundness in the banking community,” said Sloan.

E-mail jenn@hillcountrynews.com

Reader Comments