Mark Young, right, president of First National Bank of Orwell in Orwell, Vt., speaks with a customer last week.

NYT / PAUL O. BOISVERT

ORWELL, Vt. — Not much has changed over the years at the First National Bank of Orwell. Not the gilded chandeliers and teller’s booths with brass bars separating employees and customers. Not its view of the village green across the street. And most certainly not its ability to make loans, even as the big-city banks are cutting back.

“Demand is up, there’s a tight credit market out there, and we benefit from having money available,” said Bryan Young, the bank’s vice president. “We’re very particular on what and who we take, and there’s no need to take anything less than solid credit.”

While many of the nation’s large and midsize banks are staggering under the weight of bad mortgages piled up during the housing boom, the First National Bank of Orwell, Vermont’s smallest bank, founded in 1832, is having its best year in recent memory. Loans are up 22.6 percent from a year ago, and deposits are up 7 percent in the same period, Young said. The bank has $36.5 million in assets.

“If the banks maintained the lending standards that they had established in the past, and had not, and did not, buy a lot of securities from Fannie Mae and Freddie Mac, they’ve got no problems and they’re sound,” said James F. Gatti, a finance professor at the University of Vermont. “They’re attracting deposits, making loans, operating as usual.

“There is a value to sticking to your knitting, if you will,” Gatti added. “And I think banks that did will prosper, and prosper nicely, in the next few years.”

Of course, not all small banks have sailed through the financial crisis. Some invested heavily in Fannie Mae and Freddie Mac, the mortgage finance companies that were effectively nationalized in September, and must now write off that debt in their operating statements. Others, especially in places such as Florida and Nevada, are having problems after making loans to contractors who cannot sell or finish houses. There is also concern in some circles that the Federal Deposit Insurance Corporation’s decision to increase bank insurance to $250,000 from $100,000 could prop up problem banks that might otherwise fail or merge with other institutions.

And while well-managed community banks have weathered the storm, the bread-and-butter of their portfolios are mortgages and commercial loans, which could face greater risk as the economic slowdown deepens and unemployment rises.

But for the moment, most of the country’s smallest banks are doing well, in large part because they, like the bank here in Vermont, did not get into subprime loans, said Karen Tyson, a spokeswoman for the Independent Community Bankers of America, a trade group that represents small banks.

“There are about 8,500 banks, and a majority of those are not having the challenges that the larger institutions are having,” Tyson said. “They are in a position to withstand this, and they want to help the country recover.”

While a Federal Reserve Board survey found that banks overall had tightened lending on everything from commercial real estate to residential mortgages since July, First National still has plenty of capital to lend and has not had to restrict lending, Young said. “Nothing’s really changed,” he said. “We haven’t tightened anything in particular.”

First National, whose main branch is next to a village store where local residents sit on the porch, drink coffee and chew the fat, has stayed successful because its employees know the area and their customers.

“Having the borrower sit in front of us is very meaningful,” Young said. “We’re not massive brokers, trying to underwrite a loan from the 55th floor of an office somewhere. There’s serious value in looking someone in the eye and understanding what their drive is, where they’re coming from and how serious they are about the project.”

The employees at the branches here and in neighboring Shoreham also know where a building project is and what it looks like.

“We benefit from knowing what house they’re talking about, what shape it’s in and what neighborhood,” Young said. “We benefit from a very detailed knowledge of our community, its people and its geography.”

Many times, the project is on one of the dairy farms that dot the verdant, rolling hills here. Or a couple are asking for a mortgage to buy their first house. No matter who the prospective borrower is, the bank requires a 20-percent down payment for every loan, Young said.

As bigger banks fail or merge, some community banks are absorbing growing numbers of depositors, while strengthening community ties and championing their conservative approach to lending. The FDIC’s increase in deposit insurance has helped, said John S. Carusone of the Bank Analysis Center in Hartford, Conn., which provides data to small banks in 11 states on the East Coast.

“They may be viewed as a safe haven for retail and commercial customers that are disenchanted with the performance of larger banks,” he said.

Such has been the case at the Bank of South Carolina, which has four branches in the Charleston area. The bank’s growth last month was the biggest in its 21-year history, with nearly $15 million in new deposits.

“We haven’t seen growth like that since we’ve opened,” said the bank’s president and chief executive officer, Hugh C. Lane Jr.

Lane said his bank had grown carefully and refused to take risky investments.

“We generally have more conservative policies. We don’t have our foot on the accelerator and our foot on the brake. We’re consistent,” Lane said. “We’re in the niche business, and these days you’re either in the niche business or the franchise business.”

Like Young, Lane prides himself on providing personal service.

“The cardinal rule of banking,” Lane said, “is to know your customer.”