How safe is your bank?

SANDUSKY Did your bank make the naughty list this year? There are 513 of the nation's banking institut
Annie Zelm
May 24, 2010

SANDUSKY

Did your bank make the naughty list this year?

There are 513 of the nation's banking institutions that did, according to BauerFinancial, one of the most well-known companies that rank banks and credit unions. These are banks rated as "troubled and problematic," receiving a rating of two stars or below.

About 6,000 institutions -- or 59 percent of the nation's banks -- were rated on Bauer's "Nice List," or those that received a rating of four or five stars. Another 31 percent of the nation's banks fall in the middle, with a ranking of 3 or 3.5 stars.

BauerFinancial president Karen Dorway said the company, which has been rating banks for nearly 26 years, makes their determinations by analyzing two years of financial data for each institution.

"We look at the quarterly call reports each bank filed with its regulators and consider things like charge-offs, profitability, liquidity and assets," Dorway said.

Although the FDIC now insures money up to $250,000, regardless of any bank's rating, Dorway said many people still want to be more educated about their bank's solvency. Business customers with more money invested may also want to dig a little deeper than the average customer.

"The idea is if public is informed, they're less likely to panic than if they're uninformed," she said.

The FDIC also maintains a smaller, confidential list of "troubled banks" with about 100 institutions included.

Dorway said it's likely that many of the FDIC-listed banks are also listed as troubled with BauerFinancial, but there is no way to know for sure.

Of the more than 60 area banks listed in the Yellow Pages, none appeared to have a rating of less than three stars. But some banks question the accuracy of bank ratings. They say not all companies use the same criteria -- so ratings are not necessarily an "apples to apples" comparison.

"If you look at those ratings, I think you have to look at many different rating systems to get a sense of how your bank is doing," Fifth Third Bank spokeswoman Karen Fraker said. "Some (rating systems) are skewed toward smaller community banks that don't make large loans that regional banks would make."

Fraker said better indicators of a bank's success are longevity and whether the government is stepping in to help them.

When the government grants a bank money from its Troubled Asset Relief Program or helps it to negotiate an acquisition, Fraker said, that's a sign officials think it has long-term viability.

Citizen's Bank president James Miller said ratings don't have much relevance as long as a bank has FDIC coverage.

Most people don't have more than $250,000 in a single account, he said, and the FDIC now allows non-interest bearing checking accounts to be covered to their total limit.

Customers with certificates of deposit can ensure them up to $50 million through a Certificate of Deposit Account Registry Service, which allows deposits to be placed in smaller increments throughout a network of other banks.

"I think that's gone a long way in making people feel more secure," Miller said.

Vacationland Federal Credit Union CEO Kevin Ralofsky said although he believes companies like BauerFinancial generally have accurate and reliable data, customers should also look at other indicators.

Credit unions are monitored more closely than banks and tend to have a more conservative approach, he said -- which is why many have avoided problems that seem to plague banks.

Customers should consider an institution's equity and whether or not they are offering a variety of loans right now -- a good indicator of the institution's liquidity.

"Even if you're not a business owner, ask them if they're lending commercially," Ralofsky said. "That gives you an idea of where the bank is and what their plans are for the future."

Here's a list; check it twice

The following is a listing of several area bank and credit unions rated by BauerFinancial.

A rating of three stars is adequate; 3.5 stars is good; 4 stars is excellent and 5 stars is superior.

-Vacationland Federal Credit Union: 5 stars

-Erie Community Federal Credit Union: 4 stars

-Citizen's Banking Co., Sandusky: 4 stars

-National City Bank, Oak Harbor: 3.5 stars

-Fifth Third Bank, Sandusky: 3.5 stars

-First National Bank, Bellevue: 3 stars

(Note: Not all area banks were rated.)

For more information or to check your bank's rating, visit www.bauerfinancial.com.