The nation's financial industry is in the midst of a major crisis, but things are a lot different down home in Utah, where the state's banks, for the most part, are continuing to carry on business as usual.
As a whole, Utah's banks are financially sound, although the balance sheets of a few that got involved in subprime mortgage lending and riskier financing for real estate development are starting to show signs of fraying around the edges.
"Everyone is struggling and under a little more stress now than they were last year," said Edward Leary, commissioner of the Utah Department of Financial Institutions. "This economy is hard on everyone."
To date, though, the serious losses that sparked the crisis in the broader industry primarily have occurred at investment banks - the Bear Stearns, Lehman Brothers and the Merrill Lynches of the world - rather than at commercial banks that go about the more ho-hum business of taking deposits and making loans.
And that has proved reassuring for many Utahns.
Michele Lee, a professional cook from Tremonton, said she will start to worry only when she hears that regular bank depositors are suffering. "So far, I haven't heard of anyone having any troubles so until that happens I'll just figure they [federal officials] are taking care of things."
Still, even among Utah's banks, there are those that are prospering and those that are struggling.
To help determine if a bank is financially strong, the Federal Deposit Insurance Corp. on its Web site points consumers to several bank ratings companies, among them BauerFinancial, Bankrate.com and The Street.com's Weiss ratings service. They rank the individual institutions using data from the quarterly financial reports that banks must file with federal regulators.
Of the 70 Utah banks ranked by those three ratings agencies, there is only a handful judged to be struggling. Among them are Magnet Bank of Salt Lake City, Centennial Bank of Ogden and Western Community Bank of Orem.
"The banking industry generally is going through some unprecedented times," said Edward Sanches, executive vice president of Western Community Bank. "We don't feel like we're in trouble. We are well capitalized, and all our deposits are FDIC insured."
Centennial Bank executives offered a similar message.
"We were established 11 years ago as a construction and development lender," said CEO Clint Williams. "So, yes, we have been hit hard in some areas. But we've been doing everything we can to maintain the necessary capital cushion that is required."
Requests to have Magnet Bank President Chris Worel contact The Salt Lake Tribune were not successful.
When a bank's finances begin to fray, one of the first steps regulators often require is that the banks raise more capital to provide an additional cushion to absorb any further losses that might arise. All Utah banks, though, currently have adequate capital, Leary said.
Utah Bankers Association President Howard Headlee cautions that consumers not rely too heavily on bank ratings services.
"What those services do is give you a 50,000-foot perspective," he said. "While they are useful, if rating banks were that easy then there really wouldn't be any need for as many state and federal regulators."
For Utah consumers, the bottom line is that all deposits at Utah banks, savings and loans, industrial loan corporations and credit unions are federally insured. "From that standpoint there really is no difference if someone has their money deposited in the strongest or the weakest bank," Leary said. "There is no reason from a safety standpoint to move deposits from one bank to another."
What sets the state's stronger banks off from their weaker rivals is that many of their management teams made a conscious decision to avoid the temptation of getting heavily involved in underwriting and carrying on their books subprime mortgages and other loans that were made to risky borrowers and that have since become problematic.
"About five or six years ago, we beefed up our loan department by bringing in a number of older, more seasoned, bankers. They all insisted on some pretty stringent loan standards, and it helped keep us out of a lot of trouble," said Doug DeFries, the chief financial officer at Bank of Utah, which ranks as one of the state stronger banks.
The State Bank of Southern Utah, another highly rated Utah financial institution, also stuck to the traditional bailiwick of community banks - accepting deposits from customers in the cities and towns where it operates and offering loans to the residents of those same communities.
"We were getting some pressure from the real estate community to offer subprime loans, but we were determined to stay with our traditional business," said CEO Ron Heaton. "It might not have been that exciting, but it turned out OK."
Despite all the troubles that are plaguing the national financial scene, many of Utah's stronger banks maintain that they are actually benefiting from the problems on Wall Street.
"Our deposits continue to grow along with our loan portfolio, although we've had to work hard to get them," DeFries said, adding that lately Bank of Utah employees also have found themselves holding some customers' hands for reassurance amid the market's travails.
"We actually had one customer come in last week wanting to take his money out and put it under his mattress. We had to explain to him that his money was insured and safe," DeFries said. "He wasn't alone. A lot of our customers have similar concerns."
And Utah bank customers can sleep a littler easier knowing that they more than likely won't be too inconvenienced if an unexpected disaster does occur and their bank fails, to be taken over by state or federal regulators.
Regulator Leary explained that typically regulators try to take over failed banks on a Friday so they can reopen them under new ownership the next Monday. "And that weekend customers will still be able to use their debit cards and write checks."
Headlee agreed.
"I know there were images of people camping out in front of IndyMac Bank when it failed, but that was really irrational panic on their part," he said. "If a bank should happen to fail, no one needs to use a sleeping bag or put up a tent."
steve@sltrib.com
