The news of the federally backed JPMorgan Chase & Co. buyout of Bear Sterns & Co. Sunday adds to concerns about the state of the economy.
But locally, banks are sound; they're making loans, taking deposits and keeping their books straight.
"It doesn't have any impact on us," said Dave Landgrebe, president of First Federal Bank. "The only thing it does, it's one more piece of negative news in the media. It's really too bad because it doesn't have an impact on us."
"It really doesn't," said Lois Anderson, executive vice president of Security Bank USA, a family-owned Bemidji bank. "As far as how we do business, we will continue to use our prudent lending practices."
Security Bank has assets of about $95 million. Anderson said community banks are not security companies like Bear Sterns that gamble on sub-prime lending in a "huge speculative boom."
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First Federal operates in 12 locations statewide, including three Bemidji braches and branches nearby in Bagley and Walker. It is owned by 80 shareholders who live in the communities where the banks are located. First Federal assets are $330 million.
Landgrebe said First Federal and its competitors operate as community banks have always operated, knowing the customers are also the bank owners' and officers' friends and neighbors.
"The kind of products Bear Sterns were involved with were exotic," Landgrebe said. "They were doing things no local community banks would be doing."
According to the Associated Press, Bear Sterns investors lost their bets on mortgages for borrowers with poor credit. JPMorgan valued the 85-year-old, 14,000-employee Bear Sterns, which had been the fifth-largest Wall Street investment bank, at $2 a share down from about $40 a share.
"If there's a positive thing here, ... it looks as if the federal government is going to do what it takes to restore public confidence in the financial system," Landgrebe said.
Hugh Welle, First National Bank Bemidji vice president for commercial lending, agreed that local customers should be confident in their banks, which would never become overextended or lend money at high risk as Bear Sterns did.
"I would encourage the public not to push the panic button on these economic matters because banks do responsible lending here," said Welle. "We save for a rainy day for a very important reason. That equity is part of it so you can withstand a year or two where you don't make any money."
He said family-owned First National, which opened in 1897, has assets of about $440 million.
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"(Bear Sterns) probably make loans bigger than that," he said.
First National has also limited lending to a 25-mile radius of Bemidji. Less than 5 percent of loans go to people or enterprises outside that lending area, and then only customers who are Bemidji-based.
First National has also refrained from opening branches out of town.
He noted that First National remained solvent through the Great Depression and continues to keep a positive balance sheet.
"We still kind of do business the old-fashioned way: We use money on deposit from local depositors," he said.
Wells Fargo, by contrast, is a national bank with 245 locations and $575 billion in assets in Minnesota alone. Brian Hall, regional banking communications director based in Minneapolis, said that Wells Fargo has an AAA rating from Moody Investors and Standard & Poor's.
Regional President Jeff Kemink said the diversity of more than 80 products including banking, insurance, mortgages and consumer finance, as well as the geographical spread of Wells Fargo, make the bank secure.
"From our customers' standpoint, they should be very comfortable," Kemink said. "The economy is definitely in a concerning position, but it's not the sky falling."
