Community bank finds paranoid a smart bet



If I were in charge of marketing for that bank, I would be blanketing the area with radio and TV ads bragging how the FDIC has criticized it for having loan practices that are too financially sound.

What would be the point in advertising such a fact? If the guy isn't giving out loans then borrowers certainly won't have an interest in using the banks services. As a depositor I would have little interest in putting my money into a bank that didn't make loans as they must have a very poor return since it is through usury that a bank generates income. Not enough loans being made equals no revenue being generated thus no dividends paid to depositors.

Money does no good to anyone simply sitting in a vault

Before I retired, I worked for a major bank. Over the years, I reviewed and made decisions on all types of loans. In recent years, loan decisions came out of a loan processing area. It became obvious that the bank would do just about anything to get mortgage loans on the books. I was appalled at the poor quality of the loans that were being approved, but it wasn't our decision any longer.

I can't tell you how glad I was to get out when I did.

The bank is making loans, but is only limiting them to people who are creditworthy, just like it states in the linked story. The point of advertising that fact would be to attract more creditworthy borrowers, and let as many people as possible know that there are still the rare honest banks out there.

I do my personal banking with a small, privately-held local bank that barely advertises, consistently gets ultra-top dependability scores, pays low interest and charges fairly high interest, but very few fees. I depend on them for checking and short-term savings, but not for making anything on interest-bearing accounts.

How do they stay in business?

They are plugged into the local "good ol' boy" network (they practically invented it, and in Virginia that's gold). When local attorneys and businessmen find out I've banked there for 30 years, a bit of the "good ol' boy gold" smooths my path to what I need.

They know the customer (long ago when I didn't understand my new credit-card merchant account, the bank president took half an hour without an appointment to explain it to me).

And they're there for you (when I had to sell my late mother's house and also buy somewhere for my brother to live, they came up with a multi-hundred-thousand-dollar bridge loan seemingly overnight - cost me more in interest, but I got the loan).

And, most importantly of course, they'll be there tomorrow, I don't even have to do any research to satisfy any concerns.

I don't think they have any need to make risky loans ... they're doing fine without 'em.