Randolph’s Independent Bank Is Little Affected by $$ Crisis

Randolph’s Independent Bank Is Little Affected by $$ Crisis By M. D. Drysdale

Randolph National Bank President Steven Dimick, left, and board chairman S. John Osha, discuss the national financial crisis in the bank's office on Main Street. (Herald / Tim Calabro)

The national financial crisis has not had any significant impact on the loans, deposits, or investments at Randolph National Bank, the two top bank officers said this week.

In an interview yesterday with The Herald, bank chairman S. John Osha and president Steven Dimick stressed that the same is generally true for Vermont banks as a whole.

"I’ve had a lot of people ask me about it this week, but I have no sense that the fire has reached Randolph," Osha summarized.

Randolph National is one of only 11 independent Vermont banks left in the state; another is Northfield Savings, also with offices in Randolph.

The initial crisis in "sub-prime" mortgages had no effect at all at RNB, Dimick said, for a simple reason: "We didn’t have any sub-prime loans here.

The conservative approach at RNB demanded that all mortgages be fully supported, or underwritten. "The property which is the basis of the loan must have the value, and the person borrowing the money must have the income to support it," Dimick said. "That’s been our criteria."

RNB permits mortgages up to only 80% of the property value, where as the banks that are now in trouble across the country were allowing people to mortgage their homes to 100% of the value, and sometimes even more—assuming that the market value would continue to climb.

(Well-qualified first-time homeowners are allowed a 90% mortgage.)

As a result of these policies, Dimick and Osha said, the bank has seen no foreclosures coming out of the current problems.

Neither has the bank issued stricter guidelines for receiving credit. The amount it can lend is restricted by deposits, however, because RNB does not like to borrow extensively from the Federal Home Loan Bank of Boston; it currently has loans there totaling about $1 million.

The bank also has sold some mortgages to FreddieMac, while continuing to service them here; but that arrangement has not been threatened by the big insurer’s problems, DImick said.

Deposits in the bank have held steady, increasing significantly earlier in the summer. Osha and Dimick are hoping to see a further increase, as citizens may transfer money into bank deposits from riskier investments.

If the bank receives more deposits, it will expand its lending. In fact, Osha said, there has been an increased loan demand this summer "probably because people want to do business with a Vermont bank."

Some banks have seen their invested funds suffer from the stock market tumble. But RNB has been conservative in its investments, as well and has not seen a decline.

If the general economy enters a decline, that will effect banks even in Vermont, Osha and Dimick acknowledged, because deposits will slip and people may have trouble paying back their loans.

"But as it stands right now, the bank has not been affected," Osha declared.