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Local banks insulated from sub-prime crisis

Failure like that of IndyMac unlikely here, bank officials say

By CHRIS CLINE
Daily Journal Staff Writer

Monday, July 21, 2008

PARK HILLS — Amidst concerns over the collapse of the IndyMac Bank branches in California, area residents may be wondering how safe their money is. Nancy Yount, the president of the Potosi and Irondale offices of Unico Bank, said community banks are safe investments.

“Smaller community banks take additional measures to protect their investments,” she said. “We are a little more conservative when it comes to lending money.”

Julie Loughary, the executive vice-president of Belgrade State Bank, echoed those sentiments.

“Belgrade State Bank would like to reassure our customers,  that we are very strong and growing,” Loughary said. “ Our business is doing better than it ever has in the past. We are hiring new employees on a regular basis to help handle our rapid growth.”

Matt Sebastian, the president of First State Community Bank, said the banking system in Missouri is extremely solid and that the banks in the area are well run and make solid lending decisions.

“IndyMac was heavily involved in high-interest, high-risk real estate loans,” Sebastian said. “Most community banks don’t deal in these type of high-risk mortgages.”

Sebastian encourages area residents to ask for the financial statements from their banks. He said the current situation in the banking industry isn’t near as bad as it was during the 1980s, and he believes most of the current panic is stemming from confusion.

The Federal Deposit Insurance Corporation (FDIC) insures deposits and protects depositors’ funds in banks and savings associations. The FDIC deposit insurance covers each depositor’s account, dollar-for-dollar, up to the insurance limit, including principal and accrued interest. Banks that are covered by FDIC insurance typically have official FDIC signs at teller windows or entrances.

The basic insurance amount is $100,000 per depositor per insured bank. The FDIC insures checking, NOW, savings accounts, money market accounts and certificates of deposits (CDs).

Depending on which ownership category an account falls in, it can qualify for more than $100,000 of insurance. IRAs are typically insured up to $250,000. Common ownership categories include single accounts, self-directed retirement accounts, joint accounts and revocable trust accounts.

Sebastain said there are several ways accounts can be insured for amounts that exceed $100,000.

“There are ways husbands and wives can have up to $500,000 of insurance coverage at one banking institution,” he said. “My advice would be for customers to ask their banks to explain what FDIC insurance coverage is available to them.”

Sebastian said residents can access the FDIC’s electronic deposit insurance estimator at fscb.com or at http://www4.fdic.gov/EDIE/.

Last week customers in California flooded the bank branches of IndyMac demanding to withdraw as much money as they could or get answers about the fate of their deposits.

The FDIC took control of IndyMac because it did not think the lender could meet its depositors’ demands amid a run on bank deposits by customers in recent weeks. IndyMac Bank had been struggling to raise capital and manage losses from bad mortgage loans.

Customers with deposits that aren’t fully insured were told to file a claim with the FDIC so they can try to recover a share of any funds left over after the sale of IndyMac assets.

The Associated Press contributed to this story.