The financial crisis is growing and no one knows for sure who are, or what will be the next shoe to fall. In previous posts I have articulated my concerns on both the markets and those who influenced policy. In this post I will discuss how the system fails, how to evaluate the bank you keep you money in, a list of the safer banks in the country at this time, and provide a link to a web video that explains how banks work and fail. It seems now would be a good time to discuss how to evaluate your local bank in order to know how safe your money is!
Your local bank should have minimal exposure to high risk investment because if it is not minimal they are at high risk of failure. What happens if they fail? You may lose your cash or at the very least wait at least a year or two to get it back. I can assure you it will not be with interest because I speak from experience because two years ago Refco, LLC failed and it took 2 years to get 40% of my principle.
What has come out recently, banks and others have invested money market account funds in high risk CDO’s, level two assets, level three assets, and sub-prime mortgages. If individuals are unable to make due on their CDO’s or level 2/3 assets it puts pressure on banks. Why? Banks are to keep 10% of their total assets on hand in cash.
In the past, the value of CDO’s, level 2 assets, and level 3 assets were set arbitrarily by the business holding them (case in point: Bear Stearns). Now that we have had the credit crunch these same businesses that have held these risky investments now mush liquidate them. Now the problem! Now everyone and their mother is trying to sell these high risk CDO’s, level 2, and level three assets because they are all in the same financial boat.
However, when they tried to sell them those assets that were priced (for demonstrative purposes) at $100 are not selling. In reality no one will buy them at any price which was Bear Stearns problem. Now that same asset valued at $100 is in reality worth $10. Then what happens is a recalculation of assets which then turns out to be 90% less than what was reported previously! Follow me here because we are almost there!
So we have this bank or broker lending out cash or leveraging assets based on $100 that are truly $10. Therefore, the bank then must raise the cash to support the original value of the assets or sell them to someone else. In today’s environment no one will lend anyone money or buy the high risk assets and this is why Bear Stearns failed!
Unfortunately for many of us our local banks have dabbled in these high risk markets with our cash. It is your job to evaluate the bank you hold your cash. You need to ask the following:
- What percentage of their total assets are in CDO’s, level 2 assets, level 3 assets, and leveraged products.
The higher the percentage of a bank’s total assets exposed to these products the higher the risk the bank in for failing.
This link explains the history of the banking system from its creating to how it fails...A bit long but very informative in a layman’s kind of way.
http://www.brightcove.tv/...
http://www.brightcove.tv/...
These are some of the safer banks to keep your cash in!
TheStreet.com Ratings, Inc http://www.weissratings.com/
Prepared: April 17, 2007
Full State Bank Name City State TheStreet.com Rating Total Assets ($MIL)
ALABAMA CITIZENS BK OF FAYETTE FAYETTE AL A+ 174.9
ALABAMA FIRST BK OF BOAZ BOAZ AL A+ 142.5
ALASKA FIRST NB ALASKA ANCHORAGE AK A+ 2273.4
ALASKA MOUNT MCKINLEY BK FAIRBANKS AK A 259.5
ARIZONA MOHAVE ST BK LAKE HAVASU CITY AZ A- 338
ARIZONA CANYON COMMUNITY BK NA TUCSON AZ A- 90.7
ARKANSAS FARMERS BK GREENWOOD AR A+ 188.5
ARKANSAS FIRST NB IZARD CTY CALICO ROCK AR A+ 122
CALIFORNIA FARMERS & MERCHANTS BK LONG BEACH CA A+ 3073.5
CALIFORNIA SAVINGS BK OF MENDOCINO CTY UKIAH CA A+ 723.6
COLORADO FIRST FINANCIAL BK GREENWOOD VLG CO A+ 148
COLORADO FARMERS ST BK FORT MORGAN CO A+ 140.5
CONNECTICUT LIBERTY BK MIDDLETOWN CT A+ 2579.7
CONNECTICUT CITIZENS NB PUTNAM CT A+ 201.8
DELAWARE FIRST NB OF WYOMING WYOMING DE A+ 289.3
DELAWARE ADVANTA NB WILMINGTON DE A 102.6
DISTRICT OF COLUMBIA ADAMS NB WASHINGTON DC C+ 322.8
DISTRICT OF COLUMBIA NATIONAL CAPITAL BK OF WA WASHINGTON DC A+ 244.5
FEDERATED MICRONESIA BANK FEDERATED ST MICRONESIA POHNPEI FM B+ 77.7
FLORIDA DRUMMOND COMMUNITY BK CHIEFLAND FL A 162.4
FLORIDA FIRST NB NORTHWEST FLORIDA PANAMA CITY FL A 124.8
GEORGIA BANK OF LA FAYETTE LA FAYETTE GA A+ 167.8
GEORGIA MERCHANTS & FARMERS BK COMER GA A 136.2
HAWAII FIRST HAWAIIAN BK HONOLULU HI A- 12002.6
HAWAII CENTRAL PACIFIC BK HONOLULU HI B+ 5474.9
IDAHO BANK OF COMMERCE IDAHO FALLS ID A+ 687.3
IDAHO FARMERS NB OF BUHL BUHL ID A 357.5
ILLINOIS MUNICIPAL T&SB BOURBONNAIS IL A+ 278.1
ILLINOIS STATE BK OF LINCOLN LINCOLN IL A+ 180.7
INDIANA KENTLAND BK KENTLAND IN A 199.6
INDIANA GREENSFORK TOWNSHIP ST BK SPARTANBURG IN A 109.1
IOWA STATE BK OF WAVERLY WAVERLY IA A+ 112.7
IOWA IOWA SVG BK DIKE IA A+ 25.6
KANSAS FARMERS & DROVERS BK COUNCIL GROVE KS A+ 112.1
KANSAS KEARNY COUNTY BK LAKIN KS A+ 105.9
KENTUCKY KENTUCKY-FARMERS BK ASHLAND KY A+ 124.1
KENTUCKY FARMERS BK MILTON KY A+ 112.6
LOUISIANA EVANGELINE B&TC VILLE PLATTE LA A 476.6
LOUISIANA GULF COAST BK ABBEVILLE LA A 237.9
MAINE FRANKLIN SVGS BK FARMINGTON ME A 293.1
MAINE MECHANICS' SVGS BK AUBURN ME B+ 259.6
MARYLAND CALVIN B TAYLOR BKG CO BERLIN MD A+ 361.5
MARYLAND MIDDLETOWN VALLEY BK MIDDLETOWN MD A+ 144
MASSACHUSETTS NEEDHAM CO-OP BK NEEDHAM MA A+ 595.1
MASSACHUSETTS WALPOLE CO-OP BK WALPOLE MA A+ 301.6
MICHIGAN CHELSEA ST BK CHELSEA MI A+ 208.7
MICHIGAN UPPER PENINSULA ST BK ESCANABA MI A 150.2
MINNESOTA VERMILLION ST BK VERMILLION MN A 354.1
MINNESOTA PRIOR LAKE ST BK PRIOR LAKE MN A 162.6
MISSISSIPPI BANK OF NEW ALBANY NEW ALBANY MS A 336.6
MISSISSIPPI FARMERS & MERCHANTS BK BALDWYN MS A+ 153.6
MISSOURI BANK OF WASHINGTON WASHINGTON MO A+ 556.9
MISSOURI FIRST NB CAMDENTON MO A+ 269
MONTANA YELLOWSTONE BK LAUREL MT A+ 383.9
MONTANA CITIZENS ST BK OF CHOTEAU CHOTEAU MT A 64.9
NEBRASKA FIRSTIER BK KIMBALL NE A 193.6
NEBRASKA NEBRASKA ST B&TC BROKEN BOW NE A 97.7
NEVADA CREDIT ONE BANK NA LAS VEGAS NV A- 75.4
NEVADA FIRST NB OF ELY ELY NV A- 52
NEW HAMPSHIRE SOUTHERN NH B&TC SALEM NH B+ 478.6
NEW HAMPSHIRE CLAREMONT SVGS BK CLAREMONT NH B+ 304.9
NEW JERSEY CUSTODIAL TRUST CO PRINCETON NJ A+ 943.8
NEW JERSEY BRUNSWICK B&TC NEW BRUNSWICK NJ A+ 124.4
NEW MEXICO WESTERN COMMERCE BK CARLSBAD NM A 261
NEW MEXICO CITIZENS BK CLOVIS NM A 184
NEW YORK ORANGE COUNTY TRUST CO MIDDLETOWN NY A 450.2
NEW YORK NATIONAL BK OF NEW YORK CITY NEW YORK NY A 180.1
NORTH CAROLINA HIGH POINT B&TC HIGH POINT NC A 700.6
NORTH CAROLINA BANK OF CURRITUCK MOYOCK NC A 161.2
NORTH DAKOTA SARGENT COUNTY BK FORMAN ND A 68.6
NORTH DAKOTA LAKESIDE ST BK NEW TOWN ND A- 52.7
OHIO FARMERS SVG BK SPENCER OH A+ 209.3
OHIO ST HENRY BK ST HENRY OH A+ 157.8
OKLAHOMA OKLAHOMA B&TC CLINTON OK A+ 113.9
OKLAHOMA PEOPLES NB OF CHECOTAH CHECOTAH OK A 110.5
OREGON PIONEER TR BK NA SALEM OR A+ 237.9
OREGON CLACKAMAS COUNTY BK SANDY OR A+ 155
PENNSYLVANIA FIRST NB&TC OF NEWTOWN NEWTOWN PA A+ 607.6
PENNSYLVANIA HAMLIN B&TC SMETHPORT PA A 356.2
PUERTO RICO BANCO POPULAR DE PUERTO RICO SAN JUAN PR B- 25020
PUERTO RICO WESTERNBANK PUERTO RICO MAYAGUEZ PR C+ 17080
RHODE ISLAND CENTREVILLE SVGS BK W WARWICK RI B+ 826.4
RHODE ISLAND TALBOTS CLASSICS NB LINCOLN RI B 11.5
SOUTH CAROLINA ENTERPRISE BK S CAROLINA EHRHARDT SC A 325.6
SOUTH CAROLINA BANK OF YORK YORK SC A+ 167.1
SOUTH DAKOTA FIRST PREMIER BK SIOUX FALLS SD A 822.9
SOUTH DAKOTA FIRST FIDELITY BK BURKE SD A+ 225.4
TENNESSEE CITIZENS BK CARTHAGE TN A+ 466.3
TENNESSEE FIRST NB OF MCMINNVILLE MC MINNVILLE TN A+ 318.4
TEXAS FIRST ST BK BURNET TX A+ 144.4
TEXAS FIRST NB OF ALVIN ALVIN TX A+ 88.8
UTAH CENTRAL BK PROVO UT A 550.6
UTAH STATE BK OF SOUTHERN UTAH CEDAR CITY UT A 545
VERMONT MERCHANTS BK BURLINGTON VT B+ 1140.4
VERMONT UNION BK MORRISVILLE VT A- 380.5
VIRGIN ISLANDS BANK OF ST CROIX CHRISTIANSTED VI B 89.7
VIRGIN ISLANDS MERCHANTS COMMERCIAL BANK ST THOMAS VI D 18.8
VIRGINIA BURKE & HERBERT B&TC ALEXANDRIA VA A+ 1477.4
VIRGINIA VIRGINIA B&TC DANVILLE VA A+ 151.5
WASHINGTON CITY BK LYNNWOOD WA A 1077.7
WASHINGTON WASHINGTON FIRST INTL BK SEATTLE WA A 525.2
WEST VIRGINIA PENDLETON COMMUNITY BK INC FRANKLIN WV A 183.6
WEST VIRGINIA PEOPLES BK OF MULLENS MULLENS WV A 111
WISCONSIN AMERICAN BK FOND DU LAC WI A+ 203.8
WISCONSIN SHELL LAKE ST BK SHELL LAKE WI A+ 117.5
WYOMING ROCKY MOUNTAIN BK ROCK SPRINGS WY A 218.1
WYOMING FIRST ST BK OF NEWCASTLE NEWCASTLE WY A 113.6