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The Cost of Being a Good Bank

by Mark Singleton


The administration and Congress have coined the phrase The Bad Bank Plan as a term describing one of its strategies to help fix the economic ills facing Americans.  The term for the government’s plan is an absolute insult to the thousands and thousands of us operating good banks.

There are approximately 8,300 banks in the United States that are insured by the FDIC.  Of those, the Federal Deposit Insurance Corporation estimates that less than 300 are banks at risk, or under 4% of the total insured banks in the U.S.   

Let’s get this straight.  More than 96% of the banks in the nation are Good Banks, but the government’s phrase to right-the-wrong is The Bad Bank Plan.  What the program ought to be called is The Greedy, Cheating, Immoral 4% of the Banks Plan. 

Before anyone jumps to the conclusion that I (and other bankers associated with the 8,000 Good Banks in the U.S.) should stop our beefing, let me tell you what’s at stake:  YOU!

Bare with me for a moment so I can give you a small example of how the Bad Banks are getting in your pocketbook.

The drain on the FDIC reserves for the wicked ways of bad banks is astronomical.  In order to replenish its reserves the FDIC is turning to the 8,000 good banks to dig them out of the troubles they face.  Here is just one way.

At Citizens National Bank, from March 2008 through March 2009, we paid approximately $383,000 into the FDIC kitty based primarily on a percentage of deposits.  You will not hear a single complaint from bankers in regard to payments to the FDIC up until March of this year (when the rules changed) because insuring deposits is essential to building trust with our customers.

However, late last year the FDIC increased premiums effective April 2009.  These new premiums raised CNB of Texas’ annual FDIC payments to almost $721,000, or an 88% increase in funds paid.  Although the increase was painful to our bottom-line, the FDIC did raise depositor coverage from $100,000 to $250,000.

But even that increase didn’t make the FDIC healthy again.  In September 2009, CNB of Texas will have to pitch in an additional $900,000 as a special assessment payment.  Therefore, we will be required to contribute more than 1.6 million dollars to the FDIC over the next 12 months.  That is more than a 300% increase over the $383,000 paid by the bank prior to the FDIC upping payments and special assessments.

The figures I gave you for CNB of Texas become really frightening when you realize that all the 8,000 Good Banks are being asked to do the exact same thing in relation to their deposits.

So how does all of this affect you?  Well, the extra funds that a bank must pay to dig the FDIC out of turmoil are funds that you may have needed for a loan, or mortgage, or business need.

In 2008, CNB of Texas donated more than $350,000 in goodwill to the communities its serves.  In 2008, CNB of Texas honored 43 area-wide students with college scholarships.   Giving back is what all independent banks are suppose to do.

So how does all this affect you?  If paying an additional $1.2 million dollars to the FDIC is just one of the things CNB of Texas has to do to dig the Bad Banks out of their mess, will all the other extra requirements put on the Good Banks cost jobs, or donations to your church or a scholarship for your child, or a mortgage loan, or help financing a new enterprise in town?  And if any of that may affect you, multiply it by all the people that are served by the 8,000 Good Banks.

It is really amazing what the greed of 300 Bad Banks is truly costing us.


Mark Singleton is the President and CEO of Citizens National Bank of Texas.  This column is the third in a series that examines what banks, businesses and the general public in Ellis County can do to combat the current tough economic times.