How to Handle Bank Closure

Learn to be proactive, diligent in managing your accounts

How to Handle Bank ClosureNevada’s Silver State Bank became the 11th bank to fail this year. The Federal Deposit Insurance Corp. transferred most of Silver State’s deposits to Nevada State Bank, a unit of Zions Bancorp, a Salt Lake City bank with $55 billion assets. Silver State Bank had $2 billion in assets and $1.7 billion in deposits as of June 30.

This bank failure was on the heels of the demise of Integrity Bank of Alpharetta, Ga., leaving many to wonder about the security of their own banks and bank accounts.
Regions Bank of Birmingham, Ala. assumed $34.4 million of Integrity Bank’s $1.1 billion assets. The bank, which has $974 million in insured and uninsured deposits in 23,000 accounts, fell due to real-estate lending woes.

In July, California-based mortgage lender IndyMac Bancorp Inc., with $32 billion in assets, became the largest thrift to fail in U.S. history. Columbian Bank was the first bank to fail in Kansas since 1993. The list goes on and on. And, according to the FDIC, the number of troubled U.S. banks jumped from 90 to 117, the highest level in nearly five years.

It seems like every month a bank closure is being announced, most stemming from the housing and mortgage crisis. So how do you protect your accounts?

Be proactive by checking out your financial institution, says FDIC spokesperson LaJuan Williams-Dickerson. The FDIC’s Website has financial reports from every FDIC-insured institution. The agency insures deposits less than $100,000. FDIC insurance doesn’t, however, cover annuities, bonds, life insurance policies, mutual funds or stocks. Some retirement accounts, such as IRAs and 401(k)s, are insured to $250,000 per person.

You can also research the financial stability of your bank through various independent companies, most for a small fee. Among them are: Veribank, Bauerfinancial.com, AM Best, and Creativeinvest.com. Bankrate.com has a rating system that consumers can access for free. The data used to compile the ratings come from the quarterly call report filings of institutions, and each rating is based on an institution’s capitalization, asset quality, earnings, and liquidity,” says Bankrate’s senior financial analyst Greg McBride.

To check into the financial stability of your credit union, visit the National Credit Union Administration’s Website. “The NCUA Website provides information for Credit Union members and share insurance, explains how your accounts are federally insured, and the coverage,” says Washington-based financial consultant Christine Holmes-Mason.

What indicators trigger signs of an impending closure? One sign that a bank is on the verge of going under is poor ratings from a rating agency or analyst. But according to small business banking consultant Curtis Gregory, president of CJG Management Concepts L.L.C., “That’s a tough question and I’m sure there are many analysts that can fill up pages with information on this subject matter. In my opinion it is better to divert that energy around understanding your rights as a consumer, how you are protected, and what to do, as opposed to trying to project the

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