The credit crunch is showing no signs of letting up, but Massachusetts community banks say they have plenty of money to lend and are eager to put it to good use.

But they’re struggling against falling consumer confidence and the public perception that all banks are in trouble.

“The perception does lump everybody together. But [unlike large investment banks], we don’t have a credit crunch,” said Mark Whalen, senior vice president at $803 million Needham Bank and former president of Dedham Co-operative Bank, which merged into the larger institution last year.

“We were on a panel [in October] at the local cable network. There were five bank presidents, and the message was that we have money to lend and we’re safe,” added Robert Caruso, chairman, president and chief executive officer of $659 million Lowell Five Cent Savings Bank.

Lowell Five has made a variety of marketing efforts to get its message of lending capability out. It’s advertising the fact that its deposits are fully insured (up to $250,000 per individual account, plus additional insurance through the state’s private Depositor’s Insurance Fund), and Caruso recently did an interview with the local paper touting the bank’s financial health.

“I think the distinction has been made,” he said.

Seeking Safety

At least the distinction that banks are a safe place to put your money.

Like most of the banks across the state contacted for this article, Lowell Five has seen deposits increase in the past year – by more than $15 million.

“It’s not like we’re chasing them,” he said. Caruso thinks many consumers simply don’t want their money tied up in a volatile stock market.

“[Investment guru] Warren Buffet is saying, ‘Buy low,’ but the typical person isn’t taking that advice,” he said.

He anticipates the new deposits will stay put for at least two years, he said – meaning money that could be invested.

Lowell Five now has that money available to invest in securities and to lend. But customers aren’t banging down the door.

“There’s been a decline in home-equity loans, because people’s equity has decreased,” Caruso said. “We’ve also seen a decline in the construction business, because nothing is selling Â… Foreclosures are putting a lot of inventory on the market.”

Young people who might want to trade up to a larger home can’t sell their first homes right now, he added, which translates into decreased mortgage loan volume – though the demise of some non-bank mortgage companies in the wake of the credit crisis has helped banks.

Commercial lending is a mixed bag these days, Caruso said.

“You see commercial business jumping around [from bigger to smaller banks], but no brand-new business,” he said.

Mt. Washington Bank President and CEO Edward J. Merritt said his bank’s residential lending pipeline has remained steady and “at a pretty good level” of $10 million over the past year. But he said commercial borrowers are becoming more cautious.

“I think that’s a function of the economy,” he said. “[Customers] are saying, and justifiably so, ‘Now is the time to be cautious.'”

In the spring, $564 million Mt. Washington got approved as a Federal Housing Administration lender, which has increased residential business, he said.

Mt. Washington has felt the credit crunch’s impact in other ways besides borrower interest, Merritt said.

“We sell two-thirds to three-quarters of our loans to investors such as GMAC,” he said. When those investors tightened underwriting standards, Mt. Washington decided to keep more loans in portfolio, at least for now, he said.

In Southeastern Massachusetts, at Mansfield Bank, commercial lending is up 7 percent this year compared to last, while residential has increased by 15 percent – a “significant amount” – since last year, said Senior Lending Officer Daniel Conrad.

Some commercial business the bank lost to the Wall Street investor market in the early 2000s is coming back this year, he said, now that conduit investors are out of the market.

“We’ve had [commercial] brokers coming to us, saying, ‘We can’t do that loan through the conduit market,'” he said – and asking for $298 million Mansfield Co-operative’s bid.

The bank now does about 40 percent commercial lending, but is aiming to increase the level to 50 percent.

Mansfield Bank, like $247 million Scituate Federal Savings Bank, is seeing some of its new commercial customers coming from larger banks.

“People are coming from a TD Banknorth, and some from Bank of America and Eastern Bank,” said Mansfield Bank spokesman Ron Carlstrom. “I think Â… the bigger banks have a lot on their plates right now [and may not want] to be taking on new debt.”

Scituate Federal Senior Vice President for Commercial Lending Jeff Beck said that sometimes his bank is willing to take on the added risk of commercial clients some larger banks can’t accept right now.

For example, Scituate Federal will consider a small developer who doesn’t have any exposure to the market, but a good credit history and plenty of assets, he said. It’s more likely to have to turn down other potential commercial clients, such as those with five or six projects afloat, who can’t make ends meet, he said.

At Eastern Bank, the state’s largest locally-headquartered lender, spokesman Joe Bartolotta said recent lending experience has been mixed.

Commercial lending volume has remained steady, he said, but residential has gone down.

“There are some buyers out there, but clearly fewer than at this time last year,” he said. “I think it’s because people are taking a wait-and-see on the economy.”