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Local bankers: Your money is safe with us

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By Joshua Coffman

 

By JOSHUA COFFMAN jcoffman@thenewsenterprise.com HARDIN COUNTY — Local lenders say your money in their banks is like, well, money in the bank. In light of a recent high-profile collapse and federal takeover at Pasadena, Calf.-based IndyMac Bank, those who oversee financial institutions in and around Elizabethtown say banks here are safe from such failures. And independent auditors agree. Bauer Financial, a company that issues ratings for all FDIC-insured banks, considers all locally based lenders to be in good shape, giving them four-or-five-star ratings. The president of Kentucky Bankers Association sent a letter to media Friday ensuring the industry is in good hands statewide. “Kentucky banks, unlike some other lenders, have been more responsible in their lending practices and are not saddled with the burden of controlling high defaults on risky loans,” said Ballard W. Cassady Jr., who heads the association. Following the collapse and federal takeover of IndyMac, the FDIC issued a statement to calm fears of additional banking failures. As customers called or asked questions at local banks, many in the community followed suit. B. Keith Johnson, CEO of First Federal Savings, published a letter on the company’s Web site, and Bill Rissel, CEO of Fort Knox Federal Credit Union, did the same in a newsletter, each easing fears. Johnson said in an interview last week that much of the concern in the industry originates from sub-prime mortgage loans and is regional in nature — applying primarily to the western states and coastal regions. Most local banks are community based, he noted, and primarily invest in local ventures. “It’s not a critical situation,” he said. “The concern in the Kentucky area is really unwarranted.” And growth continues. The bank Johnson oversees is expanding into southern Indiana, despite the gloomy economy. However, First Federal is publicly traded on the stock exchange and, like the entire industry, has seen its shares take a hit. Again, the local effect has been a ripple compared to the dangerous high tide found in select spots in the country. Compared to a year ago, First Federal’s stock has slipped 30 percent. However, larger counterparts that operate in the region, such as National City Bank and Fifth-Third Bank have seen shares plummet by 70 to 80 percent during the same time period, largely the result of risky real estate ventures. Johnson said long-term he still sees bank stocks as a solid, albeit slow-and-steady, investment. “We’re still forging ahead. … It’s still business as usual for us; we’re just being a little more cautious,” he said. The spirit of moving ahead in a cautious time exists also at Fort Knox Federal Credit Union, which recently broke ground on a new branch in Campbellsville. Spokesman Michael Bateman said the credit union grew by 18 percent last year and expects double-digit growth again this year. The number of loans made by the credit union that have gone delinquent has been “miniscule,” he said, though the economic climate has led its members to tread lightly into the shrunken stream. “Actually, caution is a good thing,” he said. The credit union, along with Cecilian Bank, is one of two Hardin County-based institutions to currently hold five-star ratings from Bauer Financial, which bases its results on data reported to the FDIC and then analyzes them for financial security. All other Hardin County banks — First Citizens, First Federal, Kentucky Neighborhood, South Central and West Point — received four-star ratings, which Bauer Financial recommends as being safe. Of 204 Kentucky banks, only 12 received ratings of three or two stars. None received a lower grade. Of 94 credit unions statewide, nine received three-star ratings from the company. Only one credit union, Louisville-based United Labor, received a lower rating — getting zero stars. Cassady noted in his letter that, since the FDIC was created in 1933, only 44 bank failures have occurred in Kentucky — with half coming before 1940 and the last one in 1991. “Kentucky banks have always prided themselves on being there for their customers and communities,” he said. Nationally the picture still looks much better than two decades ago when, during a savings and loans crisis, hundreds of banks went belly up each year between 1985 and 1992. So far only seven banks have been taken over by the FDIC this year, including IndyMac. Despite the number of troubled institutions on the federal agency’s list increasing from 76 at the end of the year to 90 at present time, FDIC spokeswoman Lajuan Williams-Dickerson assured the industry is secure. Even if your money in the bank was to go down the financial tubes, the agency secures personal accounts up to $100,000 and retirement accounts up to $250,000. “All deposits are safe,” she said. “The banking system as a whole is safe.”   How local banks stack up The Cecilian Bank — 5 stars First Citizens Bank — 4 stars First Federal Savings — 4 stars Fort Knox Federal Credit Union — 5 stars Kentucky Neighborhood Bank — 4 stars South Central Bank — 4 stars West Point Bank — 4 stars Source: Bauer Financial Ratings, March 2008   Bank failures The number of U.S. banks taken over by federal regulators, listed by year: 2008 — 5 2007 — 3 2006 — 0 2005 — 0 2004 — 4 2003 — 3 2002 — 11 2001 — 4 2000 — 7 1999 — 8 1998 — 3 Last decade — 48 1997 — 1 1996 — 6 1995 — 8 1994 — 15 1993 — 50 1992 — 181 1991 — 271 1990 — 382 1989 — 534 1988 — 470 Prior decade — 1,918 Total: 1,966   Federal insurance Individual Personal Accounts. The FDIC ensures personal accounts, such as checking, savings CDs and money market accounts, up to $100,000 per person per institution. For instance, a person’s checking and savings accounts are insured up to $100,000 combined. Joint and Trust Accounts. A joint account for a husband and wife, in addition to a personal account, is insured by the FDIC up to $100,000. A trust account, for immediate family members, is insured up to $100,000 for each trustee. For instance, an account for five children is insured up to $500,000. Retirement Accounts. An individual retirement account, or IRA, at a bank is insured up to $250,000 by the FDIC. What is Not Insured. Stocks, bonds and mutual funds purchased through a bank are not ensured by the FDIC. An institution that advertises such services in its lobby also must notify customers that such investments are not FDIC insured. Source: FDIC, local banks   Joshua Coffman can be reached at (270) 505-1740.