When Robert Gladden bought Chesapeake Systems, a heating and air conditioning company, in 2007, he moved his banking operations from SunTrust, one of the nation's largest banks, to Howard Bank, a Howard County bank based in Ellicott City.

Gladden, 51, was looking for a local bank that would be responsive to his needs. He found it in Howard Bank.

"Not only can I pick up the phone and get ahold of them, I can be at their office in five minutes," said Gladden, whose company is based in Hanover. "They're very attentive."

Gladden found another reason to be happy about his choice when the ongoing financial and banking crisis began.

Concerned, Gladden met with Howard Bank executives and was reassured that the bank was on firm footing, he said.

"We knew they weren't tied up in a lot of real estate loans, which was really good," Gladden said.

As the current banking crisis unfolds and many banks, refusing to loan money to each other, face cash shortages, Howard Bank -- the only locally owned, Howard-based bank -- is weathering the storm, financial analysts and bank officials said.

It is doing so largely because it does not rely on interbank loans for funding, said Howard Bank Chairwoman Mary Ann Scully. Instead Howard Bank relies on capital it raised through investors and from depositors.

"Our funding sources are more stable because they are, generally speaking, local depositors," she said. "They know the bank, they know where the bank is.

"If they have a question about what's going on in this market they literally can and do pick up the phone and call me," she said. "They're people that have chosen to do business with the bank not just based on the rate that you're offering."

Tried, true methods

Babu Baradwaj, an associate professor of finance at Towson University who is familiar with Howard Bank, said the bank is surviving the storm by relying on tried and true methods of banking.

"They're doing banking the old-fashioned way," Baradwaj said. "They're using the deposit as the main source of loans and then they're making loans that actually make sense."

Elinda Kiss, a professor of finance at the University of Maryland, said many banks are facing a cash shortage brought on by a crisis of confidence among investors.

Banks will borrow from other banks to make loans if they do not have enough capital on hand, she said. In recent months, as banks with large investments in the real estate market began to lose money, banks began to refuse to lend money to each other because they were afraid they would not get their money back, Kiss said.

As a result, loans to other banks and to customers began to dry up, she said.

"There's this crisis of confidence that small businesses can't get loans," Kiss said.

Not stopping lending

Scully said Howard Bank has not stopped making loans, especially to small businesses, because existing capital and deposits are supporting the loans.

"We're not stopping lending because of this," she said.

Another strength for Howard Bank in the current market is that it does not sell its loans to a secondary market, Scully said. Before the recent banking meltdown, many banks would make a loan and then sell that loan to another financial entity in a secondary market, Scully said. Banks that relied on selling loans to a secondary market for funding are now facing a crisis, she said, because those secondary markets have become harder to find.

"We don't sell a large number of our loans into the secondary market," she said. "We don't have to do that because we have enough capital to hold them on our balance sheet."

Additionally, Scully said, Howard Bank does not rely on brokers to originate loans. When a broker originates a loan, the bank is one step removed from the customer and that generates uncertainty about the loan's viability, Scully said.

"Our business model on the asset side is very different. It's based on loans, primarily, very few investments. It's based on loans we originate directly, not through a broker, and it's based on loans that we hold in our portfolio. That's insulated us from a lot of what's happening now," Scully said.

The bank's local focus also has helped, she said.

Customers, she said, "want to be able to talk to somebody. They want to be able to look at somebody. They want to have more than a five-minute conversation with somebody in a call center hundreds of miles away."

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