Published: October 03, 2008 10:48 am            

Bankers: Local money secure

PRINCETON — While Wall Street stumbled and Washington scrambled to put the stock market back on solid ground this week, folks on Main Streets coast to coast worried how the frightening financial headlines might hit their homes.

Residents and businesspeople in Princeton and Mercer County were no different, but local financial officials were quick calm those fears.

While the financial turmoil at some of the nation’s largest banks and a tumultuous week on Wall Street certainly warrant close watch on investments, they reminded local residents that there’s a world of difference in banking between community institutions and the high-stakes giants in danger of falling.

First Century Bank’s Chief Financial Officer Ronnie Hypes said the current financial crisis could make it somewhat more difficult for Americans everywhere to secure credit, but he didn’t predict a significant change in the way banks do business in southern West Virginia.

“As the larger banks have problems, that can trickle down, in terms of the cost of borrowing,” Hypes said. “But, I don’t think in large part, the local banks have that many ties to Wall Street.”

In recent weeks, a series of large banking and investment businesses, including Merrill Lynch, Washington Mutual, AIG and Wachovia, have announced they face mergers, buyouts and possibly bankruptcy without a legislative bailout allowing them to sell troubled assets to the federal government, turn the high-risk loans over to the Fed and free up approximately $700 billion for banks to once again lend.

Most of those troubled assets arose from mortgage-related loans to high-risk applicants. When the number of grantees defaulting on those loans climbed too high, the trend created a confidence crisis and a national credit problem.

When the U.S. House rejected its proposed $700 billion bailout Monday, the Dow Jones Industrial Average fell nearly 800 points, the largest single-day points loss in its history. But, Hypes said it’s also important to keep that number in perspective. Although it was the largest points loss in one day, he said the decline wouldn’t even rank among the top 10 slides in the scale’s history, if it were calculated as a percentage of the total points available on the Dow.

“The magnitude, at this point, is just quite frankly being overblown,” he said.

And, as far as local residents’ money is concerned, the southern West Virginia institutions remained largely untouched by the Chicken Little attitude of Washington and Wall Street this week.

“We really don’t have any relationships with any of those large banks,” Hypes said. “We just do an entirely different thing from what the big banks do. We’re here for our local customers — to make sure they can buy a house and make sure they can buy a car.”

First Century’s Chief Operating Officer Frank Wilkinson emphasized Hypes’ statements, calling his institution’s lending practices solid, conservative and tailored to the communities they serve.

“We haven’t engaged in any of those lines of mortgage that have created the problems for the larger banks,” Wilkinson said. “We have strong capital ratios ... We’re locally owned. We know our customers. We know the people that we’re loaning money to and understand their ability to repay. When you make loans, you take some risk, but I think you can minimize that by knowing who your customer is.”

First Community Bank President Robert Buzzo echoed the same points Wednesday.

“All of the national news is talking about the very large banks in the country. Most of the local banks, like First Community Bank, are community banks. We deal with local customers, and we know our customers very well,” Buzzo said.

He said First Community is considered a well-capitalized bank — the highest, or most secure, designation possible, and has been ranked in the Top 100 of mid-tiered banks for several years by “U.S. Banker Magazine.”

“As far as First Community Bank is concerned, we’re very solid, very well-capitalized,” he said. “Our bank never got into the high-risk mortgages that some of the larger banks did. We kept our lending standards high.”

While borrowers in bigger markets and more high-risk ventures reported the possibility that credit lines would disappear amid the financial fallout of the week, both of the Bluefield-based banks reported they would continue lending at regular levels to local customers.

“First Community Bank is very actively lending. We have not stopped lending or cut down on lending at all,” Buzzo said.

And, hoping to quiet concerns that Depression-era images of “runs” on banks are not on the way to Mercer and Tazewell counties, officials at both institutions reminded customers that money held in local banks is insured by the Federal Deposit Insurance Corporation, more commonly known as the FDIC.

“No insured depositor with the FDIC has ever lost money at any time in history,” Buzzo said.

While there is currently a $100,000 limit on a single depositor’s insurance at an institution, the revised bailout that passed the U.S. Senate 75-24 Wednesday increased that rate to $250,000. That measure still required House passage and President Bush’s signature before it would become official.

In addition to the FDIC insurance coverage provided at First Community, Buzzo said that bank also offers FDIC insurance coverage for depositors through the CDARS Network, which offers another level of FDIC coverage for higher balance customers.

As far as advice went, the bankers urged clients to remain calm in the financial crunch and to educate themselves on their accounts and insurance possibilities.

“I think it would help a lot if people could just take time to talk to their banker and understand the FDIC coverage that is available to them,” Wilkinson said. “And, there are a lot of ways, based on the way that they title their coverage, that the FDIC can protect them.”

In addition to one-on-one conversations with banking officials, Wilkinson said the FDIC website contains valuable information for depositors and/or investors. That website is www.fdic.gov.

The nation’s largest lenders may have faced crisis recently, but neither First Century nor First Community anticipated any such news from the local operations.

“We’ve been around since 1891, and we plan on being around for a lot longer,” Wilkinson said.

Likewise, Buzzo expected his bank to ride out the lending storm and emerge as strong as ever.

“Our bank lends locally. We know our borrowers. We know our depositors,” he said. “Our bank is over 135 years old, so we’ve been through a lot of different cycles.”

The Times also contacted several other local banking institutions, but representatives were not available for comment as of press time.

— Contact Tammie Toler at ttoler@ptonline.net.

        

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