Customer Confidence: How Main Street Banks Market Their Strengths

This is the message to consumers from community banking institutions - that they've made smart investment decisions, and they're not in jeopardy from the fallout of the global credit crunch. From newspaper advertisements to letters to Congress, community banking leaders are reaching out to their consumers to say "Trust us."

Here are some examples of banking institutions that are weathering the economic storm and shoring up customer confidence:

Clifton Savings Bank: 'Business the Same Way We've Always Done it'

Clifton Savings Bank, with $900 million in assets based in Clifton, NJ, is led by self-professed "old school" bankers when it comes to banking and risk management. The bank has 2,389 home loans, and only one is in foreclosure.

"We are doing our business the same way we've always done it," says John Celentano Jr., chief executive of the bank. He predicts more people will turn to the soundly-run banks such as Clifton Savings. The bank has a strict vetting process for prospective mortgages because it doesn't sell them.

"We also make sure that the people who we sign mortgages with are qualified to carry them. It's basic banking," Celentano says. "We check everything in the loan process, from the borrower to the assessor to the real estate broker. We say we know our depositors better than our borrowers until the borrower walks in."

The bank originates loans from New Jersey, and Celentano notes "We don't plan to change the way we do business. The guys who got in trouble made a lot of money by packaging their loans and selling them quickly at a profit. Then they didn't pay attention to the quality of the loans."

He observes that people in banking "knew it couldn't last. Especially when we saw signs like, 'Bad credit, no problem, or a $1 gets you into the home,' I knew it was over."

Celentano says customers of the bank didn't question if the bank was safe from the subprime meltdown because the bank "has always communicated with them what direction it is taking." For example, in 2007 the bank faced scrutiny over executive compensation issues, but at the final hearing the judge dismissed the charges. During this time, the bank openly communicated with its shareholders and customers about what was involved, and that the charge of over-compensation was proven false.

People will be looking for banks like Clifton Savings, Celentano predicts, and the safe, more risk-averse banks will profit from this shift. "They are going to look for quality," he says.

Is "old school" banking the way to go? "As far as we're concerned, it's the only way to do business," Celentano concludes.

Hudson City Savings Bank: The 'Personal Touch'
Just down the Garden State Parkway from Clifton Savings is Hudson City Savings Bank. It was named the most efficient bank in the nation, among the largest 500 US bank holding companies for the first quarter of this year. The bank, with humble beginnings in Jersey City, has over $49 billion in assets and over 100 branches in New Jersey, New York and Connecticut.

At Hudson City Savings, applicants are carefully vetted in the application process and are more than just a credit score. At a time when other banks were creating "exotic" mortgages -- requiring no income verification, no down payment, etc. -- Hudson City was rigorous in requiring full documentation and no less than a 10 or 20 percent down payment. That careful process has proven itself with 80,000 mortgages and only 23 foreclosures.

The bank's president and CEO Ronald E. Hermance was recently interviewed on ABC's "Nightline" and noted the bank's success is due not just to its prudent banking practices, but its focus on its customers' confidence. The bank prides itself in promoting a personal touch for its customers.

This personal touch reaches past the "regular" actions. Not only does the bank send out the obligatory birthday cards and baby arrival congratulatory notes, Hermance says, but customers know they can come in with questions and get straight answers.

Evergreen Federal Bank: Reinvesting in the Community
The Evergreen Federal Bank says it needs no bailout. In an advertisement it ran last week in the Ashland, OR newspaper, bank president Brady Adams says "If other banks had run their bank like Evergreen Federal, there would be no need for the government to ask you to pay $700 billion."

He adds that he takes pride in presenting the bank's most recent financial statement. "In these troubling times you can see Evergreen Federal's financial condition is rock solid. When you trust us with your hard earned money we make sure it is safe."

The 74-year-old bank has more than $301 million in assets, says it has never made sub-prime loans and has had only one foreclosure in the last 10 years.

"We have no real estate owned, and only three loans out of 2,000 that are even behind a single payment. We have over twice as much capital than bank regulators require," Adams says. Locally owned, Evergreen is rated among the top 15 percent safest banks in the U.S. by Bauer Financial Rating Service.

"What makes Evergreen different from other banks is that we reinvest our profits into the community. We believe this investment builds a stronger community, builds our business, and helps us better serve our customers," says Jeffrey Hyde, Evergreen's Executive Vice President.

The bank backs up its promise with action. In 2007, the "Bear Hotel", Evergreen's 23,000 square-foot warehouse, was fully utilized for customer events, a workplace for artists, tours, fundraisers, and a meeting place for non-profits. More than 9,000 customers and visitors attended events at the Bear Hotel. "This helped the local economy and resulted in thousands of dollars raised for local nonprofits," Hyde says.

The bank also holds customer appreciation days throughout the year and hosts a holiday party in December.

Other Institutions, Other Voices
The view from the Lone Star state is that Texas banks are holding strong. Bankers in Texas have "long memories," says Texas State Banking's Interim Banking Commissioner, Bob Bacon. "Texas bankers should be recognized and congratulated for remembering the banking crisis in the '80s and '90s and adhering to safe and sound banking practices today."

There are a few "pockets" of pain in the state as a result of higher than normal foreclosures and past due loans, mainly in residential construction, but Bacon says the resiliency of the state's institutions and the overall banking system can be traced back to the refusal of state-chartered institutions to participate to any great extent in subprime lending. Texas has more than 400 state-chartered banks, trust companies, and foreign bank operations.

Regarding recent news coming out of Washington, D.C., federal regulatory agencies and Congressional leaders are continuing the effort to craft a program that calms Wall Street, but does not forget Main Street. "Although progress may be slow, the size of the financial rescue effort dictates the need for caution and perseverance. We must all remember that our leaders today are writing history for the next 50 years," says Bacon.

In North Carolina, BB&T, a $136 billion asset multi-state banking company with 1,500 branches in the mid-Atlantic and southeast, says while it has been impacted by the real estate market, it continues to have healthy profitability and a strong capital position. According to bank president John Allison, who sent an open letter to Congress last week before the vote, "It is important that Congress hear from the well run financial institutions."

"There is no panic on Main Street or in sound financial institutions," Allison says in his letter. The problems, he says, are in high-risk financial institutions and on Wall Street.

For more on Allison's comments, see this recent blog post by Editorial Director Tom Field.