Just a few years ago, bigger was better in the banking industry. Big banks with scores of branches meant safety and stability – just like the Roman Empire. But that empire has been tumbling down. Large banks are on the edge of insolvency and the Federal Deposit Insurance Corporation (FDIC) is cracking down on the banking industry, making their enforcement actions public.
But are all banks the same? With the constant reporting of the unethical if not immoral behavior on Wall Street from the media, the banking industry, in general, has been getting a bad rap. But ‘generalties’ have never faired man well. The discerning individual, if he is to navigate the troubled economic waters of our present day must be able to filter out the good from the bad, have access to the rating systems of the banks and determine from his own research which bank will serve him the best – and moreover, who will be there when the deck of cards fall. One has to know how to pervade through the “apparancy.”
Marc Gaspard, President of the Washington Financial League, told the Seattle Times that local community banks were just as appalled as the American people. “Very few community banks made subprime-mortgage loans or invested in the subprime-mortgage-backed securities now being referred to as ‘toxic assets.’ “
Just as with any barrel of apples, a few bad apples can mess it up for the rest. Community banks have been lumped in the banking crisis by the criminal and irresponsible actions of Wall Street.
The sleeping giant might just be the community banks, knighted by default with the responsibility of carrying the American banking system on their shoulders. It appears today that community roots have more appeal than a decade ago. In the rural region of Pasco County, Florida, one community bank withstood the scrutiny of BauerFinancial, a third-party rating system that reviews bank institutions’ 30-page report filed with government regulators each quarter. No bank can fall off BauerFinancial’s radar, whether they’d like to or not.
BauerFinancial performs an independent analysis on the raw data supplemented with historical data in order to assign their ratings. For several consecutive quarters, they rated First National Bank of Pasco as one of the safest banks in the nation.
FNB Pasco’s Board of Directors, veterans in the banking industry, apparently dug in their heels in regards to their financial strategies when Wall Street was living large. “Conservative” was the prevailing theme. According to them, sound financial principles are on the same order as natural laws, like gravity or inertia. Bob Sumner, President of Florida Bancshares, Inc., said there’s no escaping these principles, evident in the Wall Street debacle.
Has anyone been listening or even paying attention to their community banks? Even back in October of last year Newsweek reported Karen Tyson of the Independent Community Bankers of America stating that the majority of community banks were overall “sound, stable, well-capitalized and trustworthy."
What can Americans do? It is not enough to merely believe the hype. Look past the salted bank promotions containing slogans of trust, safety and security and actually get them to prove it. Even though FDIC.gov is not a super user-friendly site, one can still learn their methods for rating banks if one searches enough. There are helpful sites such as bauerfinancial.com that has a great FAQ page and bankrate.com that gives an easy way to do a cursory check on how one’s bank is doing.
Federal regulatory capital requirements vary among institutions and are dependent on many factors. In general, institutions are required to maintain a tangible capital ratio of at least 4%, a tier 1 risk-based capital ratio of at least 4% and a total risk-based capital ratio of at least 8%. (bauerfinancial.com)
It is time for Americans to open up about their finances and find banks they can trust. Three basic actions they can initially take are to:
Today is the era of accountability. No one is exempt. As the saying goes, “put up or …”
