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Highlands Today

Ratings: Local Banks Are Sound

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By GARY PINNELL

Highlands Today

Published: March 22, 2009

SEBRING - Banks and savings institutions insured by the Federal Deposit Insurance Corp. reported net losses of $26.2 billion in the fourth quarter of 2008.

Twenty banks around the nation failed in the fourth quarter, compared with two in 2007. Twenty-two percent of all banks were unprofitable in the fourth quarter, double the number from the previous year.

What does that mean to Highlands County?

Banks along both coasts had more issues than central Florida banks, said John Williams, president of Riverside National Bank. "I don't think we had a single foreclosure in Highlands County."

Riverside made lots of automobile loans, and that industry is also in trouble, Williams said, explaining one reason why Riverside has a two-star rating.

Attempts failed to reach other local bank presidents and managers on Friday.

But according to Bauer Financial Inc., a Coral Gables company which has been rating banks and thrifts since 1983, locally owned banks get four or 3.5 stars, meaning they are in excellent or good shape. Five stars is the top rating. Financial data is compiled from data reported to federal regulators.

Banks don't pay much attention to ratings, Williams said. "And the customers, quite frankly, shouldn't either. As long as you're at $250,000, it doesn't matter if a bank has zero stars or five, your money is just as safe."

As a group, American banks are still sound, said a press release issued by FDIC Chairman Sheila Bair. At year-end, 98 percent of all insured institutions met or exceeded the highest regulatory capital standards.

Even with the recessionary economy, total deposits increased by $307.9 billion (3.5 percent), the largest percentage increase in 10 years.

"Public confidence in the banking system and deposit insurance is demonstrated by the increase in domestic deposits during the fourth quarter," Bair said.

Even so, the FDIC's "Problem List" grew during the quarter from 171 to 252 institutions, the largest number since the middle of 1995. The FDIC doesn't publicize the names of the banks on its watch list.

Total assets of problem institutions increased from $115.6 billion to $159 billion.

There is disagreement with the FDIC. "The health of U.S. banks is quickly deteriorating," Scott Mayerowitz, an ABC reporter wrote in August. "Thanks to a collapsing housing market and a weak economy, a growing number of banks are struggling to stay afloat, with not enough cash on hand to cover losses from bad loans."

"I think there's going to be a steady drip, drip, drip of bad news," said Sean Ryan, a banking analyst with Sterne Agee told ABC last year. "We've only seen the very tip of the iceberg in terms of bank failures." Ryan expects 100 bank failures before the end of 2009.

"I fully expect the FDIC insurance fund to be depleted," Ryan added. "The FDIC is going to be one of what is going to be an increasing string of government bailouts."

That would leave taxpayers on the hook. Robert Reich, former secretary of labor under President Clinton, told ABC News that "it's obvious to anyone who is following these numbers that our banking system is very weak right now."

Reich, now a public policy professor at the University of California at Berkeley, said that while the situation is not a crisis, "it's very serious."

That was in August. By Dec. 31, it was reported that higher level of losses for actual and anticipated failures caused the insurance fund balance to decline during the fourth quarter by $16 billion; $19 billion remained available in the fund, and another $22 billion has been set aside for estimated losses on failures anticipated in 2009.

Insured institutions charged off $37.9 billion of troubled loans, more than twice the $16.3 billion that was charged off in the fourth quarter of 2007, the FDIC reported. At the end of 2008, a total of 2.93 percent of all loans and leases were not current, the highest level for the industry since the end of 1992.

Highlands Today senior reporter Gary Pinnell can be reached at 863-386-5828 or gpinnell@highlandstoday.com

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