Confusion and concern caused by a California bank’s failure this week has spread to Emporia. But local bank officials say that Lyon County’s banking system is stable.
“Everybody in Emporia, Kan., is fine,” said Karen Sommers of ESB Financial. “You hear all this stuff and it scares people.”
Sommers said many people misunderstand the system.
“A lot of people are under the misconception that they can only have $100,000 in an FDIC bank,” she said. “But that’s not true. You can have different accounts and $100,000 in each account.”
Sommers cited an award that ESB received from BauerFinancial Inc, of Coral Gables, Fla. BauerFinancial is an independent bank rating and research firm that released a statement saying that ESB Financial has earned a five-star superior rating from the company.
“The 5-Star rating is based on the overall financial picture of the bank and indicates that ESB Financial is one of the strongest banks in the nation,” the release stated.
The bank also was deemed a Exceptional Performance Bank, which is only extended to banks that have received a five-star rating for 10 years or more. ESB Financial has held it for more than 16 years.
“In a climate where it’s increasingly difficult to shine, ESB Financial proves it can be done,” said Karen Dorway, president of BauerFinancial. “It fact, local residents should be proud that their community bank is one of the elite financial institutions in the nation. They can rest assured that their deposits are well-placed in this 5-star bank.”
Joe Wendling, president of Olpe State Bank, said Olpe State Bank also is rated a 5-Star bank with BauerFinancial. They have held this ranking with the company for almost 19 years, Wendling said, giving them the ranking of the Exceptional Performance Bank as well.
Wendling said a variety of methods are used by BauerFinancial to determine a bank’s rating. According to BauerFinancial’s Web site, www.bauerfinancial.com, the company uses data compiled for U.S. banks and thrifts from what is termed a “call report,” which is data that is reported to federal regulators. Call reports can be found on FDIC insured banks at https://cdr.ffiec.gov/public/. These reports contain information about the loans and securities banks have.
“All institutions are subject to federal regulatory requirements, but those requirements vary among institutions and are dependent on many factors,” the BauerFinancial Web site stated. “...Institutions are required to maintain a tangible capital ratio of at least four percent, a tier 1 risk-based capital ratio of at least four percent and a total risk-based capital ratio of at least eight percent.”
Among the other factors that BauerFinancial uses are a bank’s profitability/loss trend, level of delinquent loans, chargeoffs and repossessed assets, value of investment portfolio.
“Our capital is about twice what the FDIC looks for,” Wendling said. “We’re capitalized right about 15 percent.”
Wendling said every type of asset in a bank has a risk value applied to it. Cash assets come in at zero. Some loans are rated at 50 or 100 percent risk rate.
Wendling said Lyon County’s banking industry is strong especially because there’s not a building boom in the area.
“The banks in Lyon County are pretty well-managed banks,” he said. “We haven’t had that real strong building boom especially in office buildings and commercial type buildings. We’ve probably got more houses for sale than should be in the market, but a lot of those loans do not belong to local banks... Things are good. I think most of the banks in this area are in good shape.”
According to the FDIC Web site, the banking industry in the United States is federally regulated and safe. Commercial banks, thrift banks and savings banks carry FDIC insurance, which insures money up to $100,000 in each account and up to $250,000 in retirement accounts.
“... Our banking system is strong,” the FDIC’s Web site stated. “This crisis will pass, as have all the others, and the result will be a stronger financial system with fewer unregulated players and a reminder that liquidity and capital are both important to solvency.”
John Hall of the American Bankers Association said banks are prepared for fluxes in economic times.
“Banks are well-positioned to handle economic downturns, and if necessary, take steps to put losses behind them,” Hall said in a press release. “Banking’s capital — which serves as a buffer against any losses — is at historic highs. As of March, 2008, the industry held $1.36 trillion in capital plus $120.9 billion in reserves for a total buffer of $1.48 trillion.”
eiggohp (anonymous) says...
I heard on the news that The State Bank of Lebo hasn't done as well. But everyone needs to remember their funds are insured up to $100,000 an account and the worst thing one can do for a bank is panic and rush in to withdraw your money. I hope they work this out so that everyone can rest a little better, but this is happening all over. Times are not good, but we have weathered worse.
July 19, 2008 at 1:13 p.m. ( permalink | suggest removal )
justamom (anonymous) says...
There are places you can call for a bank rating as well. Here is a # i heard about on a weekly investment commentary I listen to on-line. I called them yesterday to get a rating on my bank....I was surprised. The ratings are given in an A, B, C, D or F with pluses and minuses just like a report card. They were VERY knowledgable and had a lot of good advice. Its a free rating! 1.800.525.9556 No gimmick, no pressure, no sales tactics.
July 19, 2008 at 3:11 p.m. ( permalink | suggest removal )