Leader Blues

Tuesday, September 23, 2008

TOP STORY > >Bankers reassure depositors

Leader staff writers

Area banks say they’re safe and sound and are attracting new depositors who are fleeing bigger banks because of their financial problems.

Mark Stocks, president of First Security Bank in Cabot, said that overall, bank customers want to make sure their money was
FDIC (Federal Deposit Insurance Corporation) insured, which is the kind of safety local banks offer depositors.

The deposits are guaranteed for up to $100,000 per account holder, and $200,000 for retirement accounts.

“We are seeing some of the local investors move from mega-banks to the local community-oriented banks,” Stocks said.

“Overall, the banking industry in Arkansas will be fine,” said Stocks.

Stocks said he has not seen a run to pull money from local banks.

Larry Wilson, president and chief executive officer of First Arkansas Bank and Trust, said, “We have had more inquiries than normal about the FDIC insurance and the condition of our bank in general.

“We are proud to say that our bank is one of the strongest in the state,” he continued. “Its capital ratio based on information sent to the FDIC June 30 showed that the bank had the highest capital ratio of any large bank in the state.”

The capital ratio is an indicator of a bank’s “cushion against economic downturn or other problems that a bank may have,” Wilson said.

His bank was ranked 14th in the state, with more than $100 million in capital assets and $500 million in total assets.

The 13 banks ahead of First Arkansas Bank in higher capital ratios were all smaller banks with an average size of just $70 million.

Total assets include loans, mort gages and real-estate holdings that a bank is responsible for.

Wilson said that it is important for the public to understand that Lehman Bros. and Merrill Lynch are investment banks, not commercial banks. Although there have been a few commercial banks that have failed, “the vast majority of them are safe and sound, especially in Arkansas,” he explained.

In 1933, the FDIC was established to protect deposits under $100,000, Wilson pointed out.

“The vast majority of deposits are under $100,000, so there is nothing to worry about if they are in an insured bank.”

Dewitt Yingling with Regions Bank in Beebe said Monday that he believes his customers, like most people, are monitoring the situation, but they don’t seemed particularly worried.

“On the local level, there really hasn’t been any panic,” Yingling said. “And I don’t know that there is any reason to panic. Everything still works.”

And like his customers and almost everyone else, Yingling said he also has more questions than answers about how the economy has reached the point where the government is considering a $700 billion bailout for investment bankers, more money than he can even conceptualize.

Yingling said he has been in banking for 30 years and when he worked with mortgages, they were simple to understand.

“Mortgages were cut and dried,” he said. “Either you could afford it or not.”

What he doesn’t understand, he said, is why that changed.

“For 75 years, no one has ever lost a penny of insured deposits,” said FDIC Chairman Sheila Bair, “but as with any type of insurance, depositors are responsible for knowing how FDIC coverage works in order to ensure their money is protected. While awareness of the FDIC is high, understanding of deposit insurance is not. We want to encourage people to learn the basics and provide reassurance that, if they are within the coverage limits, their money is 100 percent safe.”

“No one should ever lose a penny of their deposited money, but Americans need to take the time to look at their accounts to ensure they’re covered,” said Suze Orman, who will be doing public-service announcements for the FDIC.

“I have donated my time to this FDIC campaign because I want everyone to go to EDIE the Estimator — an online tool that provides customized information about their insured accounts — and follow the simple steps to make sure their money is 100 percent FDIC protected,” Orman said.

Depositors can go to the FDIC’s Web site, MyFDICinsurance.gov.

Leader staff writer Joan McCoy contributed to this article.