Local banks stable despite national turmoil: The nation's big banks may be melting down, but local community banks and credit unions are seeing some of their best business in years

Nov 24, 2008 (Yakima Herald-Republic - McClatchy-Tribune Information Services via COMTEX) -- WM | Quote | Chart | News | PowerRating -- With a national financial crisis unfolding, Randy Hyatt decided it wasn't a good idea to keep all his company's money in one bank.

So Hyatt, the chief financial officer of Hyatt Family Facilities, a company that owns several nursing homes, moved an account from a midsize regional bank to Yakima National Bank, a community bank.

Hyatt said he was happy at a midsize bank but felt it was necessary to spread his risk.

"We felt that at a smaller bank, one has a lot more control over its destiny," he said.

Hyatt is not alone. Community banks in the Yakima Valley are receiving more business from organizations and consumers who believe that local institutions provide more security amid a national bank crisis.

While larger, publicly traded banking companies such as Seattle-based Washington Mutual are failing, local banks and credit unions are seeing some of the best business they've had in years.

When rumors about WaMu's financial instability became publicized nationwide in early September, Washington Mutual lost $16.7 billion in deposits in 10 days. That equals about 8.9 percent of the $188.3 billion in deposits it had at the end of June.

Yakima banks and credit unions, by contrast, began seeing healthy increases in deposits. It wasn't just WaMu's fortunes that had customers worried. Wall Street began getting jittery as it became clear that the nation's largest financial institutions were running low on cash.

Yakima National Bank saw both deposits and loan volume increase 4 percent between September and October.

At nearby Yakima Federal Savings and Loan Association, deposits grew by 1.5 percent during the same period without the bank doing extra advertising or specials.

Meanwhile, Yakima Valley Credit Union increased its deposits 4.7 percent between September and October, and has had a record number of account openings during the last few months.

"I think that with everything that's been in the headlines, on the news, people are feeling that maybe some of the larger institutions may not be as stable," said Mina Worthington, president and CEO of Yakima Valley Credit Union.

At Catholic Credit Union, deposits increased 1.8 percent between Aug. 31 and Oct. 31 of this year.

BauerFinancial Inc., a firm in Coral Gables, Fla., that gives ratings for banks and credit unions, recently gave several Yakima Valley-based banks and credit unions a perfect five-star rating. And several others with five-star ratings have offices in the area.

Such a high rating is given to banks that are well-capitalized and can demonstrate that their customers' deposits are secure.

Not surprisingly, customers want to know how their banks are being rated these days. The firm had a three- to four-fold increase in phone calls and Web activity this fall, said Karen Dorway, president of BauerFinancial Inc.

Higher ratings tend to favor community banks and credit unions, such as those in the Yakima Valley. These banks generally practice traditional banking and lending methods and have stayed away from the subprime lending and odd financial investing tools that crippled larger banks, Dorway said.

"In a larger, diverse publicly traded company, there's a lot more pressure to perform, a lot more pressure to increase earnings," she said.

The national banking crisis has likely prompted customers to return to institutions where they have immediate access to decision makers, bank officials say.

"There is a sense of fear of the unknown," said Jeff Newgard, president and CEO of Yakima National Bank. "Keeping it local, they have a feel of the local economy and the local players. There's a sense of security."

And at a time when people want immediate answers, the last thing many customers want to encounter is the automated phone system that comes with larger banking institutions, said Mike Broadhead, president of Central Valley Bank. "It's very difficult for a consumer or customer to communicate with dial one, dial two or dial three," he said. "The frustration of not talking to a human being is being highlighted by this crisis."

Hyatt, the chief financial officer of Hyatt Family Facilities, is still doing business with the midsize bank in Yakima and said he's happy with its service.

But the problem is that those local bank employees don't have much pull in what ultimately happens, he said. The bank is based outside of Yakima.

"We wanted to diversify to a bank where we could keep our fingers on the pulse," Hyatt said.

With the financial crisis, many note that the banking industry is reverting back to traditional lending and banking practices.

No longer will loans be given to those who can't show they are able to pay it back. And no longer will those loans be packaged into high-risk investments.

But community banks and credit unions aren't returning to such practices -- they have been following conservative lending guidelines for some time, Broadhead said.

"Our core lending values (are that) we want people who can repay the loan," he said. "We've always been that way."

--Mai Hoang can be reached at 577-7685 or mhoang@yakimaherald.com.

Yakima Valley banks and credit unions with four- or five- star ratings, which are considered solid ratings.

Yakima Valley-based banks and credit unions with five-star ratings:

--Central Valley Bank

--Yakima Federal Savings and Loan

--Yakima National Bank

--Catholic Credit Union

--Lower Valley Credit Union

--State Highway District 5 Credit Union

--Yakima Valley Credit Union

Yakima Valley-based banks or credit unions with four-star ratings:

--Calcoe Federal Credit Union

--Central Washington Federal Credit Union

Five-star banks with operations in the Yakima Valley:

--Baker Boyer National Bank (Walla Walla)

--Wheatland Bank (Spokane)

--Washington State Employees Credit Union (Olympia)

Four-star banks and credit unions with operations in the Yakima Valley:

--Cashmere Valley Bank (Cashmere)

--Hapo Community Credit Union (Richland)

-- Source: BauerFinancial Inc.

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