Today's economy is looking very shaky to many people and it's making some worry about whether their money is safe in the bank or if they should pull all of it out and stuff it in a mattress. Even though the government passed the controversial $700 billion bailout plan, Wall Street has yet to see the effects of it and many people are worried about their money.
Although big city banks have been suffering with unsafe mortgage and loan practices, community banks are doing well.
According to the American Bankers Association, "Banks are highly capitalized and prepared for economic fluctuations."
"We recognize that consumers have many concerns about the economy and financial sector and, most likely, are confused by the recent events," David Doherty, president of Pulaski Bank Northeast Arkansas, said.
All of the local banks have made the same comment about staying locally focused. "The key is most community banks are well capitalized banks in a good, strong community," Jason Taylor of First Community Bank said.
"We are not in the business of loaning outside of our market," Taylor said. "Therefore we are not exposed to the subprime like the investment banks."
Taylor explained that several years ago, in a better economic time, large mortgage banks were promoting programs to lend to people who would normally not qualify for a loan. "In a strong economy this may work," Taylor said. But as Taylor explained, for whatever reason, when the housing market dropped and gas prices were rising it caused a lot of people to not be able to pay their mortgage resulting in the downfall of the large investment banks who took these risks, this is the subprime.
"With the failure of banks around the country, people are certainly concerned about the security of their own money," Doherty said. "We assure that we remain liquid and that our conservative operating philosophy has protected us from having many of the issues facing the financial industry today."
"We are still lending money and continue to be focused on building relationships with our clients," Doherty said.
As with Pulaski and First Community banks, most community banks are continuing business as normal. One of the difference between the banks that are all over the media and local banks, is their investment decisions. As Taylor explained community banks tend to stick to their policies on lending, keeping their risks low.
"As long as we continue to live in a strong community we should not have to worry about our banks," Taylor said.
BancorpSouth with locations in Horseshoe Bend and Melbourne stated, "Our conservative loan policy and strict operating standard, guide every decision at BancorpSouth. Our job is to assist with your financial needs; as a federally-insured bank provide safeguards for your deposits; make responsible loans to help grow our communities; and give our shareholders a reasonable return for their investment."
According to BancorpSouth, "(The bank) has almost no exposure to sub-prime mortgages nor do we promote the type of mortgage that has been the subject of recent criticism. Much of our market area has not been part of the boom in housing prices and has not been adversely affected by the falling values mentioned in the media."
Mark Montgomery, president of the Bank of Salem, said that community banks are strong. "First off, the severity of the economic crisis assures that we won't feel all of those effects around here," Montgomery said. He said the jobs in this area are more stable and if the area does see an economic downturn, "It won't be the crisis we see on Wall Street."
"Community banks have a strong capital, much more capital than any of the big banks," Montgomery said. "In November, (the Bank of Salem) will be 100 years. So we've weathered several storms."
Montgomery advises customers to remain calm. "The American economy has always lifted itself up and it will again," Montgomery said.
First National Banking Company also had a statement for worried customers. "Our customers may be watching the news and reading the papers and naturally, they worry about their own banks," Marty Sellars, president of First National Banking Company said. "We understand their concern, but want to reassure our customers that they need not worry about the stability of our bank and the safety of their money."
"We encourage customers to call us if they are concerned," Sellars said. "We value our relationship with our customers and our communities, and we want everyone to feel secure -- both now and well into the future."