Amid Financial Turmoil, Small Banks Thrive Wall Street may be on a roller coaster and credit markets in a deep freeze, but many smaller, local banks aren't yet feeling the pinch. They lend only as much money as they take in and stayed out of the subprime mortgage business. Leon Moore, of the Bank of Floyd in Floyd, Va., says his bank hasn't taken a federal loan in 10 years.

Amid Financial Turmoil, Small Banks Thrive

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Now, to a bank that's not afraid of failure, the Bank of Floyd. It's in Floyd, Virginia, in the southwestern part of the state, that's a town of about 400 people. Floyd County has about 16,000, and many of them depend on the Bank of Floyd, established in 1951. Leon Moore is its chairman, president and CEO. He says his bank's assets are worth about $220 million, and he says those assets are safe because the Bank of Floyd avoided investing in Fannie Mae and Freddie Mac and does no subprime lending.

Mr. LEON MOORE (Chairman, President and CEO, Bank of Floyd, Virginia): The overall credit crunch that we're seeing, we're not experiencing that here. We have a lot of deposits that we raise in our branches, which are consumer deposits out here, and we turn around and loan those out. So, we do not live very much on borrowed money. As a matter of fact, we have not borrowed money from the Federal Home Loan Bank or any of the bigger banks, we have not borrowed money in ten years.

BLOCK: We've been hearing this that, as the credit crunch tightens, that more and more people will have a hard time getting loans. And I wonder, if you think looking forward that somebody coming into your bank, a farmer, say, or someone else, might have a harder time now getting a loan than they might have before.

Mr. MOORE: Well, I don't think it's going to affect your smaller banks and your smaller communities as much as it will your bigger cities. But what will happen as the credit markets continue to dry up, then it will trickle down to a point that your businesses will be affected. They will not be able to borrow, they will not be able to continue the employment for their people, and then you will have a problem locally as well as the bigger cities.

BLOCK: Are you starting to see folks coming in looking for loans who have just much worse credit than they might have a while ago? You can't make them a loan because their credits so lousy?

Mr. MOORE: We have started to see that, yes, particularly for some new customers that may be coming to us.

BLOCK: I would think that in a small community like yours, you would know a lot of these people.

Mr. MOORE: We know quite a number of them, yes.

BLOCK: That's got to be a hard position to be in.

Mr. MOORE: Well, it is. But we have found that, in many cases, when people start to have problems, they will come in and talk with us before it gets too bad.

BLOCK: And is there anything you can do for them?

Mr. MOORE: Sometimes we can, yes.

BLOCK: Mr. Moore, since we've been seeing the collapse of some of these big financial institutions, have you been seeing folks coming in to you worried about whether their money is safe in your small community bank there?

Mr. MOORE: Yes, we have, and what we've tried to do is to assure the people that, yes, we are well capitalized, yes, we do have money to loan, yes, we are conservative. It's just a process of talking to your customer and assuring that customer that you know what you're doing and that you're watching after their money.

BLOCK: What do you think about the bailout package that's been kicking around in the Congress getting shot down and now seems to have another life?

Mr. MOORE: Well, I simply know that something has to be done. One problem we have at the end of the day is consumer confidence. If they don't have confidence in the financial markets, if they don't have confidence in their congressmen, then we've got a problem. So, sooner or later they've got to address the issue and come up with some solution to that.

BLOCK: Well, Mr. Moore, thanks for talking with us.

Mr. MOORE: All right. Thank you very much. It's good to talk with you.

BLOCK: Leon Moore is president and CEO of the Bank of Floyd in Floyd, Virginia.

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