MONROE - The Nov. 19 closing of First Banking Center, which had branches in Monroe, Darlington, Shullsburg and Albany, raises questions about the financial stability of other banks in Green and Lafayette counties.
Some financial strength analysis companies have given low ratings to several area banks, based on their reviews of publicly available regulatory filings.
But does that mean bank customers need to be necessarily concerned with the stability of their banking institutions?
"For those who would have more than the insured amount of funds in one bank, the rating systems may offer some comfort," said Mike Klassy, vice-president of the Bank of Monticello. "Most bank customers concerned with ratings are unable to adequately utilize the numerous methods (used by) the FDIC."
Weiss Ratings gave the Bank of Monticello a D rating in its third quarter, and Bankrate, Inc. gave the bank one star out of five possible in its mid-year report.
Klassy noted that another company, Bauer Financial, rated the Bank of Monticello at 3.5 stars out of five possible, as of Sept. 30.
Among other area banks, the Bank of Brodhead received a B from Weiss Ratings in its third quarter analysis and five stars from Bankrate, Inc. at mid-year.
The Bank of New Glarus received a C-minus and four stars. The Wisconsin Community Bank and Woodford State Bank received C-minus ratings and four stars. Union Bank and Trust, Evansville, which acquired some branches of Amcore Bank last year, received a C-minus and three stars.
The First National Bank, Darlington, received a B rating and four stars, while the First National Bank in Platteville received a D and two stars. Gratiot State Bank received a C and three stars. Anchor Bank, Madison, received an E-minus and one star.
The Federal Deposit Insurance Corporation (FDIC) issues a Problem List each quarter. Nationally, the number of banks on the list climbed from 829 in June to 860 at the end of the third quarter in September.
The FDIC does not release the names of the banks on its problem list. However, depositors can find bank analysis and ratings issued by independent analysts, such as Weiss Ratings and Bankrate, Inc. A weak-rated bank represents a potential for financial loss to its depositors, as well as a number of complications for depositors and borrowers.
Weiss Ratings and Bankrate, Inc. have given severe ratings, C-minus and below, to more than half of the banks doing business in Green County.
The FDIC website has none of the banks listed as receiving any consent orders or corrective action directives from the FDIC in the past two years.
"You must remember confidentiality; the rating services have no access to more information than what is available to the public from the FDIC. Their ratings are heavily based upon current earnings and the totals reported for non-performing loans," Klassy said. "They have no information on the specifics of the assets. Those specific details make a significant difference in the ability for improvements in asset quality and profitability."
Bankrate gave the Bank of Monticello an overall composite score of one star as of June 2010, based mainly on its conclusion that the bank had a poor standing (1 star) in both its earnings and its asset quality. It gave the bank an average score (three stars) in capital and liquidity.
Early warning indicators of bank problems include farm loans, and according to the most recent Federal Reserve Bank of Chicago Ag Newsletter, farm loans in Wisconsin are being repaid at a rate slower than the other states in the district, Michigan, Indiana Illinois and Iowa. Though it appears farm loan repayments have slightly improved recently, repayments are still not at full speed.
In Green County, farming prices can directly affect local banks.
"A few years ago, milk prices took a very serious drop. This did lead to several collection issues, not all of which have been fully resolved at this time," Klassy said. "The Bank of Monticello has a delineated market area as is required of all banks by the Community Reinvestment Act. Our market area is still very highly invested in agriculture, as is the Bank of Monticello."
The Fed newsletter indicated also that farm land values in Wisconsin have not rebounded as much as in the surrounding states.
While Klassy said farm commodities regularly move in value, his bank has not seen any significant change in their farm customers' requests.
"Obviously if higher commodity prices are not totally consumed by higher input costs, the ag community enjoys a more prosperous period," he said. "The prosperity of the ag community has a strong impact upon our local economy and all of its businesses, including the banks."
So, what does the Bank of Monticello tell customers who discover their bank has a less than comfortable rating from independent analysts?
"We are one of the few small banks who have an annual independent audit conducted by Certified Public Accountants. We have had audits for more than 20 years and have always received a clean opinion in our audits," Klassy said. "A copy is provided to our shareholders, and one is available at the bank for review for those people interested."
The FDIC monitors banks' financial risks and when it finds a problem, issues orders for the bank to take corrective measures.
When issues of asset quality impact a rating, banks must work within the legal system to correct and/or collect these loans, said Klassy.
"This collection process can take several months to more than five years if the debtor utilizes bankruptcy as a tool to survive their financial difficulties," he said. "Disposing of acquired assets can also take an extended period of time in a slow economy."
The FDIC insures each bank account up to $250,000, and has not failed to cover those accounts in the 149 failed banks in 2010.
Some financial strength analysis companies have given low ratings to several area banks, based on their reviews of publicly available regulatory filings.
But does that mean bank customers need to be necessarily concerned with the stability of their banking institutions?
"For those who would have more than the insured amount of funds in one bank, the rating systems may offer some comfort," said Mike Klassy, vice-president of the Bank of Monticello. "Most bank customers concerned with ratings are unable to adequately utilize the numerous methods (used by) the FDIC."
Weiss Ratings gave the Bank of Monticello a D rating in its third quarter, and Bankrate, Inc. gave the bank one star out of five possible in its mid-year report.
Klassy noted that another company, Bauer Financial, rated the Bank of Monticello at 3.5 stars out of five possible, as of Sept. 30.
Among other area banks, the Bank of Brodhead received a B from Weiss Ratings in its third quarter analysis and five stars from Bankrate, Inc. at mid-year.
The Bank of New Glarus received a C-minus and four stars. The Wisconsin Community Bank and Woodford State Bank received C-minus ratings and four stars. Union Bank and Trust, Evansville, which acquired some branches of Amcore Bank last year, received a C-minus and three stars.
The First National Bank, Darlington, received a B rating and four stars, while the First National Bank in Platteville received a D and two stars. Gratiot State Bank received a C and three stars. Anchor Bank, Madison, received an E-minus and one star.
The Federal Deposit Insurance Corporation (FDIC) issues a Problem List each quarter. Nationally, the number of banks on the list climbed from 829 in June to 860 at the end of the third quarter in September.
The FDIC does not release the names of the banks on its problem list. However, depositors can find bank analysis and ratings issued by independent analysts, such as Weiss Ratings and Bankrate, Inc. A weak-rated bank represents a potential for financial loss to its depositors, as well as a number of complications for depositors and borrowers.
Weiss Ratings and Bankrate, Inc. have given severe ratings, C-minus and below, to more than half of the banks doing business in Green County.
The FDIC website has none of the banks listed as receiving any consent orders or corrective action directives from the FDIC in the past two years.
"You must remember confidentiality; the rating services have no access to more information than what is available to the public from the FDIC. Their ratings are heavily based upon current earnings and the totals reported for non-performing loans," Klassy said. "They have no information on the specifics of the assets. Those specific details make a significant difference in the ability for improvements in asset quality and profitability."
Bankrate gave the Bank of Monticello an overall composite score of one star as of June 2010, based mainly on its conclusion that the bank had a poor standing (1 star) in both its earnings and its asset quality. It gave the bank an average score (three stars) in capital and liquidity.
Early warning indicators of bank problems include farm loans, and according to the most recent Federal Reserve Bank of Chicago Ag Newsletter, farm loans in Wisconsin are being repaid at a rate slower than the other states in the district, Michigan, Indiana Illinois and Iowa. Though it appears farm loan repayments have slightly improved recently, repayments are still not at full speed.
In Green County, farming prices can directly affect local banks.
"A few years ago, milk prices took a very serious drop. This did lead to several collection issues, not all of which have been fully resolved at this time," Klassy said. "The Bank of Monticello has a delineated market area as is required of all banks by the Community Reinvestment Act. Our market area is still very highly invested in agriculture, as is the Bank of Monticello."
The Fed newsletter indicated also that farm land values in Wisconsin have not rebounded as much as in the surrounding states.
While Klassy said farm commodities regularly move in value, his bank has not seen any significant change in their farm customers' requests.
"Obviously if higher commodity prices are not totally consumed by higher input costs, the ag community enjoys a more prosperous period," he said. "The prosperity of the ag community has a strong impact upon our local economy and all of its businesses, including the banks."
So, what does the Bank of Monticello tell customers who discover their bank has a less than comfortable rating from independent analysts?
"We are one of the few small banks who have an annual independent audit conducted by Certified Public Accountants. We have had audits for more than 20 years and have always received a clean opinion in our audits," Klassy said. "A copy is provided to our shareholders, and one is available at the bank for review for those people interested."
The FDIC monitors banks' financial risks and when it finds a problem, issues orders for the bank to take corrective measures.
When issues of asset quality impact a rating, banks must work within the legal system to correct and/or collect these loans, said Klassy.
"This collection process can take several months to more than five years if the debtor utilizes bankruptcy as a tool to survive their financial difficulties," he said. "Disposing of acquired assets can also take an extended period of time in a slow economy."
The FDIC insures each bank account up to $250,000, and has not failed to cover those accounts in the 149 failed banks in 2010.