Local bank customers, shell-shocked by the U.S. financial system meltdown over the past year, appear to be choosing local community banks over larger, commercial banks for their loans.

Charles Withee, Executive Vice President and Senior Loan Officer at The Provident Bank, said that his and other community banks in the Newburyport area are seeing a “windfall of trust” in lending.

At the Newburyport Five Cent Savings, Marc MacBurnie, Executive Vice President, said: “For the last two years, borrowers have been flocking back to community banks.”

The reason, MacBurnie said: “At community banks, we have to look at our customers in the eye again. We are consistent. We don’t change our loan policies.”

Mike Jones, COO of the Institution for Savings, said: “We are conservative. We never got into trouble” offering exotic loans to customers who ultimately couldn’t pay for those loans.

All three local bankers attributed the success of the community banks to what Withee called “the long-standing trust we have with our customers.”

The Provident saw an increase in its residential lending in 2009 of 89 percent over 2008. In 2008, the mutual bank loaned $18 million in residential mortgages. Last year, it made $36 million in residential loans.

Withee said: “We didn’t do anything magical. They (customers) are now seeking us out.”

The Newburyport Five Cent Savings Bank and Institution for Savings also saw strong increases in residential and commercial lending. The Newburyport Five loan portfolio grew by $14 million from $454 million in 2008 to $468 million in 2009, MacBurnie said. Residential mortgages at Newburyport Five hit $297 million.

The Institution saw its residential lending rise from $134 million in 2007 to $172 million in 2008, to $188 million in 2009, Jones said. He attributed the success in large part to a skilled and experienced staff at the bank.

Home equity loans, once considered a quick way to raise money for home improvements, pay off debt or send a child to college, have dropped off substantially nationally. In Newburyport, the banks are still making home equity loans, but the market tends to be flat.

At the Newburyport Five home equity loans were at $24 million last year.

The Institution saw its home equity loan portfolio rebound from a $5 million level in 2008 to $8 million, which was slightly higher than it was in 2007.

Withee said the demand for home equity loans at The Provident slowed significantly last year because people are being more cautious and the value of many homes has declined, rather than increased, making home equity loans harder to get.

Small business loans have slowed in demand because businesses, the bankers said, are hunkering down, being more cautious, delaying equipment purchases and hiring people. But for the Newburyport community banks even the commercial loan portfolios were a bright spot.

The Newburyport Five’s commercial loan portfolio hit $145 million, MacBurnie said. The Institution saw its commercial loans increase from $17 million two years ago to $20 million last year, Jones said.

The Provident saw its commercial loan business drop off from 2008, which Withee said was an unusually strong year, with $65 million in loans. Last year the bank made $52 million in commercial loans, which is more on par with 2007 when the bank loaned $58 million, he said.

The bankers were optimistic about continued growth of their loan portfolios and bullish on the Newburyport area economy.

Jones described the Newburyport area as “an incredible market.”

MacBurnie agreed, saying: “Newburyport presents a fantastic opportunity for 2010. And it will be for next three to five years.”

Withee expects the first quarter of 2010 to be slow because of the stalled economy and because winter is traditionally a slower time of the year for business. But Withee, the next chairman of the Greater Newburyport Chamber of Commerce, said the bank is “cautiously optimistic about the local economy.”