Over the last 18 months, the national news media has intensely focused on the perils of the banking and financial industries and the impending doom of our national economy. Make no mistake, the crisis has been severe and governmental intervention has been necessary in order to bring stabilization to these industries. But we�re not there yet. Almost daily we read about another super-bank getting more government money to aid in this stabilization process. Why? The most consistent answer I hear is that these super-banks are so tied and integrated in national and international financial markets that a decision to not help them might signal a global financial meltdown. Public outcry has been enormous on this topic and scrutiny from government regulators and the news media has basically labeled the institutions getting federal aid as �bad� banks. Well, I�ve had more than a gut full of this �bad� banks talk, and my message to you in this column is that all banks are not the same!

Let�s look at the big picture of this financial crisis. In early 2008, mortgage loan foreclosures began to spike because rate increases made payments too high for borrowers to pay. Large mortgage banks ended up with non-performing loans on their books that they had to ditch at fire sale prices. Profits at these banks began to plummet. Mortgage lenders scaled back on lending money and the construction industry began to suffer. With foreclosures selling for pennies on the dollar, new house inventories were not selling for projected market prices and real estate values also began to plummet. The large insurance companies that provided mortgage insurance to lenders in case of borrowers� default ran out of reserves and could no longer pay the claims on policies to the lenders. Wall Street was heavily invested in these large mortgage banks and insurance companies, so when the mortgage banks recorded losses and the insurance companies couldn�t pay the claims, the stock of the Wall Street firms also began to plummet. Investor fear was rampant on Wall Street and the stocks of the banking and financial services industries that were traded on Wall Street dropped like a rock.

Now, let�s look at the local picture of this financial crisis. Local banks feel the pinch of a strained economy too. When loan rates are so close to deposit rates, there�s not much room for profit for banks. But for the most part, local banks did not take the risks that large banks took a few years ago in making mortgage loans that borrowers couldn�t afford to pay down the road when rates would adjust higher. In most cases, local banks are in business for the greater good of their customers and not just the commission to be gained from the next �no-faced� transaction. Local banks are opened to serve the communities where they�re located by providing deposit products and services to customers and lending a percentage of these deposits back to their communities in the forms of consumer and business loans. Frankly, most local banks don�t have the appetite to take the amount of risk that many large banks have taken.

I guess by now you�ve gathered that I�m an advocate of local banks. And I�m definitely not enamored with the idea of being lumped into the �bad� banks bucket alongside the super banks that are getting the national media�s attention of late.

In 1997, I visited with over 300 prospects to sell stock to open Covenant Bank. I had 97 of those 300 prospects to write checks totaling over $4.2 million in opening capital. Covenant Bank opened on 12/30/97. We ended 2008 with over $107 million in total assets and we�ve done most of this business within the communities that we serve. Sure, we take risks every day. All banks do. But we try to operate our bank within the levels of products and services that we understand. If I can�t explain to my customers how a product or service works, then I have no business offering it because I don�t fully know the depths of risk associated with it. If I can�t measure the risk, I can�t know all of the downside consequences. So, at Covenant Bank, we stick to the old-fashioned ideals of banking by offering products and services that we understand, while offering the latest in innovative technologies to make these products and services more convenient for our customers. Customers we know by name and see in our communities every week.

It�s that simple. All banks are not the same. And Covenant Bank is safe, growing, and here to serve you. Have questions? Come sit down with me to discuss them. I�m here for you.