Geof Longstaff
"Community banks don't have significant investments in subprime loans or deteriorating credit card debt," says Longstaff. "They aren't focused on restructuring their balance sheets or waiting for a government bailout."Additionally, because loan decisions are made locally, "community banks are better able to respond quickly and effectively, whereas a large national or regional bank loan approval committee may meet another state," the banker says.
And in Central Florida specifically, deposits continue to grow despite the global banking crisis, he points out. "Central Florida community banks saw their share of deposits grow from 15 percent to 20 percent in the two years prior to June 30, 2008," he says.
Longstaff is chairman of Mercantile Commercial Capital LLC, an Altamonte Springs, FL bank that focuses on providing loans to small businesses. He also teaches at the Louisiana State University Graduate School of Banking.
"Community banks are themselves small businesses," he says. "They understand the needs of small business owners. Their core concern is lending to small businesses and farms, not to corporate America."
Longstaff cites numbers from the Independent Community Bankers of America that show assets at community banks range from less than $10 million to more than a billion.
The loan risk to community banks is far less than major banks encounter.
"Typically, community banks consider such indicators as character, family history and discretionary spending in making loans," he says. "They channel most of their loans to local neighborhoods where their depositors live and work, and the end result is that community banks serve as the backbone of the American financial system."
Longstaff says another reason community banks will be in the forefront of the economic recovery is that they are run by local citizens who have a stake in the community.
"Small community banks have been a part of the fabric of the American financial system for decades," he adds.
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