Smaller banks stand tall amid financial chaos

Posted October 10, 2008 5:48 p.m. EDT
Updated October 10, 2008 7:50 p.m. EDT

— Although Wall Street and major financial institutions have been knocked down in recent weeks, executives at smaller banks said they're standing strong.

"Our financial condition is very good," said Larry Barbour, president and chief executive of Raleigh-based North State Bank.

Barbour received his training at Wachovia Corp. before founding North State a decade ago, and he said the downfall of Wachovia and major Wall Street names like Merrill Lynch and Lehman Brothers is disappointing.

"It's sad. It's really sad," he said.

Still, he credited Wachovia for teaching him that sound business practices and profitability should always precede growth, and he said North State and other community banks stick to that philosophy.

"I don't know of any community banks that make or made sub-prime loans," he said of the questionable loans that helped bring down the larger banks. "We're really not capable of handling and understanding those types of investments and monitoring those and managing those."

North State continues to make other loans, Barbour said.

"We are (loaning money), but we will not do it unless there's a (customer) relationship in the bank," he said, adding that he thinks most community banks that began offering loans to non-customers will stop doing so.

Even with sound fundamentals, North State's stock price is down roughly 45 percent for the year.

"(With) our share price and the share price of (other) community banks, it's guilt by association," Barbour said.