Monthly Archives: June 2012

2011 stats show steady decline in bank crimes

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The most recent annual bank crime figures from the Federal Bureau of Investigations show a continuing trend toward fewer crimes. The FBI reports a total of 5,093 robberies, burglaries, larcenies and extortions in 2011. This number is down significantly from a few years ago.

In 2003, 2004 and 2006, there were well over 7,000 banks crimes each year. In 2005, there were nearly 7,000 such crimes. But the numbers have been declining steadily since then. In 2008, there were 6,700 crimes; in 2009, there were 5,943; and in 2010 there were 5,546. The figures seem to debunk the common myth that bank crimes increase during recessions and times of economic difficulty.

In 2011, loot was taken in 89 percent of the cases, totaling some $38 million. More than $8 million of that was recovered. Acts of violence were part of 201 of the crimes, including 70 instances involving the discharge of a firearm, and 116 assaults. Eighty-eight people were injured, 13 killed and 30 taken hostage.

Friday between 9 a.m. and 11 a.m. was the most likely time that crimes took place.

These statistics do not track computer crimes against financial institutions.

More creativity needed, not more uniformity

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Information out of the Pew Charitable Trusts generally carry a lot of weight. Former FDIC Chair Sheila Bair lately brings the organization even more credibility, as she head’s up one of Pew’s new projects, the Systemic Risk Council, a watchdog organization that will monitor the implementation of the Dodd-Frank Act.

Because of the organization’s gravitas, I am concerned about the weaknesses in its most recent report on overdraft fees — weaknesses brought to light by an enterprising reporter at the American Banker newspaper.

This report by Pew, called “Still Risky, An Update on the Safety and Transparency of Checking Accounts,” casts five banks in a bad light because Pew says they fail to disclose fees related to extended overdraft penalties. These are fees that some banks charge after a checking account has been overdrawn for a number of days. Pew examined the web sites of the 12 largest banks to find their fee disclosures. Five banks, including Wells Fargo, don’t mention anything about “extended overdraft penalty fees.”

Kate Berry of the American Banker looked into it and found a pretty good reason the banks don’t disclose the fee: they don’t charge such a fee. She writes about it here. A spokesperson for Pew says the banks should state on their web site that they don’t charge such a fee. But it doesn’t take a lot of common sense to see how crazy things could be if banks are required to list every fee they don’t charge. For example, if I can park for free in my bank’s parking lot, does the bank have to state on their web site that there’s no parking fee?

What Pew is getting at is that they believe there should be a standard disclosure format that all banks use to describe the fees associated with their checking accounts. But I am not in favor of that idea. That’s the kind of idea that simply moves banks closer to the utility model. Banks are not utilities and we should not be pushing them in that direction. If anything, we need more creativity from banks. Bank should be trying to differentiate themselves from one another, not trying to make themselves like every other player out there.

Fees, of course, should be disclosed, but banks should be free to determine the best way to make such disclosures. There already are laws on the books threatening banks that mis-disclose or under-disclose. Clear communication is important, but that does not have to mean boring uniformity. Keep in mind that efforts to standardize products and services work to the advantage of the largest institutions which have business models based on volume; smaller institutions, which have business models based on service, do better when they are free to market their products and services as they see fit.

 

Bank closed in Illinois

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Farmers and Traders State Bank, Shabbona, Ill., was closed by the Illinois Department of Financial and Professional Regulation on June 8. It is the third Illinois bank failure this year and the eighth Midwestern bank overall.

The FDIC facilitated the sale of the closed bank’s $43.1 million in assets and $42.3 million in deposits to First State Bank in Mendota, Ill. No loss sharing agreement was made.

Farmers and Traders State Bank was the 497th largest bank among Illinois’ 572 banks at the end of the first quarter. It had two offices and 12 full-time equivalent employees. It reported a loss of $1.6 million at the end of 2011 and a second loss of $1.65 million at the end of the first quarter. The bank’s equity capital had shrunk to 1.34 percent by March, 31.

The FDIC estimates the cost of resolution to the Deposit Insurance Fund to be $8.9 million. It is the 27th bank to fail in the country this year.

Dad gave me what I needed

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It was fall of 1991 when I had gone back to work for Paul Blackburn who owned NorthWestern Financial Review. I worked at the magazine earlier, but had left to take jobs at Honeywell and the Minnesota Bankers Association. I always loved the magazine and I made comment to Paul that if he ever wanted to sell the magazine, he should let me know. He said: “You want to buy the magazine? Make me an offer!”

That caught me by surprise. I was 30 years old, had no money, and no credit history. Working with Bob Cronin, my friend who also worked at the magazine at that time, we put together an offer. Blackburn agreed to handle most of the financing, but we still had to come up with a substantial down payment. I went to my Dad. I didn’t know what he would say, but I asked to borrow the money from him. He said yes, surprisingly quickly. I had no track record; he was taking a big chance. I am sure he understood the risk, as he made me sign a one-page document he drafted outlining the repayment terms.

We closed the deal in March of 1992, and within a few years all the loans were paid off. Everything worked out well, and today I have 20 years of experience owning a small business that I love. Dad took a chance on me, and I will be forever grateful.

But Dad did something even more important than lending me money — he gave me my entrepreneurial spirit. After a decade as a school teacher, Dad branched off into self-employment, owning and managing real estate. I watched him through my teen years and beyond as he managed business challenges and took on new opportunities. It is a tremendous education, better than anything I got at school. He taught me about hard work, risk and reward, opportunity and fulfillment, commitment and fair play. I am sure that if it hadn’t been for my Dad, I never would have even thought of asking Mr. Blackburn about buying the magazine.

Dad, who lived a full life, passed away Thursday night. Here is the obituary.

Father’s Day is Sunday, June 17. If your father is still alive, be sure to take a little time that day to acknowledge him.

Wisconsin bankers show support for military personnel

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The Wisconsin Bankers Association signed a “statement of support” with the members of the Employer Support of the Guard and Reserve (ESGR) during a ceremony held June 5 at the WBA offices in Madison. Other groups around Wisconsin and across the country have signed similar statements and WBA is encouraging its members to sign on as well.

“WBA is proud to join the many banks and businesses that already are a part of this important endeavor,” said Rose Oswald Poels, WBA president/CEO. “This is  a significant way for our association to honor and serve those in the National Guard and Reserves.

“On a personal note, I believe it is important to support the re-employment of veterans as I come from a military family with both a father and uncle who were in World War II and another uncle who was in both the Korean War and the Vietnam War,” she said.

By signing the statement of support, the WBA pledges that:

  • It fully recognizes, honors and enforces the Uniformed Services Employment and Re-Employment Rights Act.
  • Its managers and supervisors will have the tools they need to effectively manage those employees who serve in the National Guard and Reserves.
  • It will continually recognize and support our country’s service members and their families in peace, in crisis, and in war.

Dick Vallin, chair of the Wisconsin Committee for Employer Support of the Guard and Reserve, an agency of the Department of Defense, said: “By meeting the statement of support criteria, WBA will stand proudly with Guard and Reserve employees, who continue to answer their nation’s call to defend our way of life. Their personal sacrifices are essential to the strength of our nation.”

Click here for more on ESGR.

A photo of the signing ceremony, including several banks and ESGR representatives, will be featured on the cover of the June 15-30 edition of NorthWestern Financial Review magazine.

New web site rates bank according to small business loans

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If you saw our e-news that went out yesterday, you might have read this item from National Public Radio touting a new web site: www.BankingGrades.com. The site “grades” banks using letter grades such as A, B all the way down to F, according to the level of small business loans made relative to the bank’s deposits. The site uses the FDIC definition of small business loan as any business loan under $1 million.

The Huffington Post ran this article about it. It notes that many smaller banks got better grades that many of the nation’s largest banks. The article includes a list of the top 10 banks in the country for small business loans according to BankingGrades.com; nine of the 10 banks are located in the Upper Midwest: three from Nebraska, two from Iowa, two from Minnesota, and one each from South Dakota and North Dakota.

I think the purpose of the BankingGrades.com site is to help small business owners who are looking for credit. By making it easy for a business owner to identify banks that have a history of making a lot of small business loans, it might give them a better idea of which banks to approach when they need credit.

The site actually ranks every bank in the country by the percentage of small business loans to domestic deposits. The Huffington Post says that Farmers State Bank in Hosmer, S.D., comes up ranked no. 1. When I checked it at BankingGrades.com it came us as ranked No. 2, but no matter. With $14.139 million in small business loans against $12.943 million in deposits, it has a percentage of 109.24 percent. Of course, the bank’s total assets are $18.8 million, so I am not sure how useful this is to small business owners looking for credit, other than to those who live and work in or near Hosmer.

It is important to note that BankingGrades.com uses year-end 2011 data and things may have changed during the first quarter. For example, the site ranks First Resource Bank in Savage, Minn., as the 5th leading small business lender in the country, citing its $4.296 million in small business loans against its $4.577 million in deposits. However, on Jan. 27, First Resource Bank acquired the failed Patriot Bank and now has deposits of $90 million and small business loans of $27.5 million. It’s current percentage of small business loans to deposits at 30.26 percent is considerably different from its year-end percentage of 93.86 percent.

Most of the banks in the top 10 list are small; the State Bank of Colon, Neb., for example, which Huffington Post tells us is No. 10, has $16.9 million in assets. All but four of the banks on the list have less than $50 million in assets; the largest bank in the Midwest is Community Bank, Nevada, Iowa, which has $157.3. The largest bank on the list is Wright Express Financial Services Corporation of Midvale, Utah, which is a $1.3 billion organization.

I am not sure how helpful the BankingGrades.com service is to small business owners, but it is interesting to a bank-stats geek like me. Certainly, bankers should take a minute to see what the site is saying about their bank. Some consumers or potential borrowers might find it particularly interesting to go beyond the BankingGrades.com grade and actually review the information the FDIC collects for every bank on small business lending. Getting at that info can be a bit of a trick, but let me offer these instructions:

At www.FDIC.gov home page, click on “Analysts” under “quick links”; then click on “Institution Directory” under “Top Picks”; then click on “Find Institutions” under “Use the FDIC Directory to:”, then enter your bank’s name and location and click “find”. For the sake of this example, I am entering Farmers State Bank, Hosmer, S.D. Then click on the “cert” number. Then, under “ID Report Selections” choose “All Summary Information,” then click on “Generate Report.” The third underlined item will be “net loans & leases.” Click on that. Then, scroll all the way to the bottom of the page and click on “Small business loans.”  You will then be presented with a screen that gives you the dollar amount of small business loans in four categories, as well as the actual number of loans made in those categories.