Texas community banks staying healthy, despite other banks going under

The Texas Banking Commissioner gave the health of Texas community banks a favorable diagnosis at a press conference at the Capitol Friday. The conference was called in response to heightened customer concern in Texas following media hype surrounding the closure of IndyMac Bank, a California-based mortgage lender.

The Texas Department of Banking saw a surge in the number of phone calls in the last week from customers worried they would lose their money if their community banks were also to close.

"I understand the anxiety that can come when you see these events and hear or read news reports about the stresses in the banking system," Commissioner Randall James said. "I am here to tell you that your deposits are safe."

IndyMac Bank closed on July 11, making it the fifth financial institution to close this year. Financial analysts say the bank's failure is largely because of its lending practices during the housing boom.

"Texas community banks did not participate in the exotic mortgage lending practices that we're hearing so much about these days," said Cliff McCauley, chairman of Independent Bankers Association of Texas. McCauley is also executive vice president of Frost Bank, which is based in San Antonio and has 91 branches throughout the state, including three in Austin. McCauley followed James at the press conference to share his observations on the health of the Texas banking industry.

"We're very fortunate to be banking in Texas, as our economy remains relatively strong," McCauley said. "We're an economy that people and businesses are attracted to, and the Texas banking community stands ready to support those who want to participate in our prosperity."

Despite a decrease in job growth, Austin is home to one of the better economies in the country, according to the Mortgage Guaranty Insurance Corporation. Austin's real estate market is also stable, while the national market continues to struggle.

"The proof of our prudence is reflected in the real estate markets in Texas," McCauley said. "While we did not participate in the excesses of the boom, we, likewise, are not victims of the bust."

The Federal Deposit Insurance Corporation, which was founded in 1933 to restore public confidence in the banking system and to insure deposits in the nation's banks, was named the conservator of IndyMac's accounts. James asked concerned customers to seek more information from the FDIC to better understand their deposits are safe. He encourages Texas citizens to call the FDIC, talk to their bankers and visit the FDIC Web site to realize "they are protected probably to substantially higher dollar figures than they realize on the front end."

"I cannot, and I will not, guarantee that Texas will not see one or more bank failures this year," he said. "But I can guarantee that no one has lost a penny of a FDIC-insured deposit."

See www.fdic.gov for more information.

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