Chad Hoffman, president and CEO of the Richwood Banking Company, says the federal bailouts of major financial institutions has been a blessing in disguise for community banks like his.

Chad Hoffman, president and CEO of the Richwood Banking Company, says the federal bailouts of major financial institutions has been a blessing in disguise for community banks like his.

"I have to admit that the current environment has been very friendly to the community banks," he said. "With the large banks in the news and a few of them changing ownership, we have found that clients are looking for somebody local to handle their accounts."

The fact that smaller banks like his have not received federal bailout money has been a plus.

"A large number of clients have asked if we received any bailout money," Hoffman said. "It's surprising to me how many people were making their decisions on where to deposit their money based on whether they got bailout money."

With the Federal Deposit Insurance Corporation (FDIC) raising its coverage to $250,000 and extending that coverage for another four years, Hoffman said consumer confidence in community banks has remained stable.

However, he noted that the FDIC assessment is being dramatically increased. He said the Richwood Banking Company's FDIC fees last year were $30,000. By the end of this year, he estimates that cost will increase to as much as $200,000.

"Needless to say, businesses don't take those kinds of hits and not pass that along," Hoffman said. "We're looking for ways to use our money more wisely, but at the same time if the government continues to take more money from us, that's going to flow down to our clients. There's no way it's not going to do that."

Hoffman also noted that most community banks were not involved in the sub-prime lending scandal, so there was no need for them to strengthen their lending standards.

He said changes in banking practices at larger financial institutions have actually driven business to smaller community banks.

"We have had several loan customers come into our bank and say 'I've been working with my bank for 30 years and all of a sudden they don't do this type of loan anymore,'" he said. "We find that kind of strange because you loan to the person borrowing, not to why they are borrowing."

Hoffman said there is no credit crunch at community banks because since deposits are up they have more money to loan than before the economic downturn began.

He also noted that tough times have led consumers to be more financially aware.

"We have also seen improvement in our clients' behavior toward their finances," he said. "In the month of April it was reported that the number of debit card purchases actually exceeded the number of credit card purchases for the first time in history. That means that less purchases were made on credit and more were made straight out of your account. From a banker's perspective, that's a good thing."