LOCALIZE IT: Banks and our money after 2 rapid-fire failures

EDITORS/NEWS DIRECTORS:

Silicon Valley Bank became the second largest bank to fail in U.S. history on March 10, followed two days later by the third largest, New York-based Signature Bank. Those twin calamities quickly prompted federal authorities to guarantee full refunds to all depositors — no matter how wealthy they are — to avoid cascading panic.

While Treasury Secretary Janet Yellen and Cecilia Rouse, chair of the White House Council of Economic Advisers, have sought to assure the public that the U.S. banking system is fundamentally sound compared with its state before the 2008 global financial crisis, plunging bank stocks and a phenomenon some are calling the first Twitter-fueled bank run has Americans asking: "Is my money safe?"

We offer tips and resources for reporting around whether banks in your area are trustworthy and reliable.

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PUBLISHABLE CONTEXT

The Dodd-Frank Act of 2010 was supposed to ensure that Americans’ money was safe, in part by setting up annual “stress tests” administered by the Federal Reserve. The tests examine how banks might fare under future economic downturns. They are supposed to gauge whether banks and other systemically important financial institutions would be able to continue lending to businesses and households should a wave of pressures converge. The tests estimate potential resiliency against rising unemployment, plunging asset values — such as another collapse in home prices — and “severe market volatility.”

But in 2018, Congress rolled back some of those protections. Some Democrats joined Republicans in raising the minimum threshold for banks subject to the Fed’s stress tests. Institutions with less than $250 billion in assets were no longer required to participate. Investor focus over the past week has centered on mid-sized banks, generally defined as those with assets of $15 billion to $115 billion, which are now exempt from the Fed’s most rigorous testing.

Even smaller institutions — community banks with assets of less than $15 billion, for example — are vital to specific geographies because they lend to businesses and individuals that might not qualify for loans from bigger banks. Like mid-sized institutions, community banks aren’t subject to the Fed’s stress tests.

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KEY QUESTIONS AND RESOURCES

— Who owns the bank, and are deposits there protected by the Federal Deposit Insurance Corp.?

Start with the FDIC's BankFind Suite. Unlike searching the Securities and Exchange Commission's website, this search helps by suggesting related names and includes basic information about banks not traded on any stock exchange. A big green FDIC check mark indicates the bank is FDIC insured, meaning deposits of $250,000 or less are guaranteed by regulators. If the bank fails, depositors get their money back up to that threshold.

— What's happening in other business sectors that might impact area banks, and what are local businesses worried about?

A big part of SVB’s downfall was its concentration on lending to the technology sector, where businesses have slashed tens of thousands of jobs since the fourth quarter of last year. Being knowledgeable about which industries are concentrated in your area is key. For example, many community banks are big lenders to agricultural interests. Rising inflation is bound to affect their depositors. The local chamber of commerce is a good place to ask what area businesses are worried about and how those worries may be reflected in bank balance sheets.

— Credit unions might also be a good indicator of what’s happening locally. Where is their business coming from? Are they seeing an increase in business lending while area banks see decreases? They are insured by the National Credit Union Share Insurance Fund.

— Investment banks, mutual funds, pension funds and other financial institutions employ analysts who dissect the inner workings and valuation of companies, including large, small and mid-sized banks. In addition to churning out information for clients, they’re often willing to talk to the media.

— Local chambers of commerce; municipal, county or state politicians; small business owners; economic development experts at local universities and regional development think-tanks can provide additional insight into the health of banks in the area and the local economy.

— Also consider interviewing local members of Congress about whether they supported the 2018 legislation relaxing Dodd-Frank protections and whether they might reconsider that position now.

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WHAT TO LOOK OUT FOR

One way to assess a financial institution’s health is to look at its capital ratios and its loan-to-deposit ratio, i.e. the amount of its capital and reserves versus its total assets, and the amount of loans it has issued or debt it has taken on versus the amount of money it has in deposits. While these are not the only factors to consider, they will provide a baseline about a bank's health. This information can be found in various places: self-published via the bank's investor relations page or via the Federal Financial Institutions Examination Council. The FDIC's “Search for information” results also list total assets and total deposits.

Other resources of information from the FDIC: Quarterly Banking Profile reportsBank Financial ReportsCommunity Bank Search

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DIGGING INTO PUBLICLY TRADED BANKS

Stock price is one sign that can indicate a bank may be in trouble. But remember that individual performance should always be compared with peers. If an entire sector is diving, like banks for example, that doesn't mean every bank is in trouble.

The triggering factor in the run on Silicon Valley Bank was its decision to sell its collection of Treasury bonds at a loss and the announcement of plans to raise up to $1.75 million in capital in order to strengthen its position.

For publicly traded companies, information like this can be found in financial reports filed to the SEC, which are publicly available via the SEC's Electronic Data Gathering Analysis and Retrieval search tool. Form 10-Q filings detail a company's quarterly financial filings, Form 10-K filings detail a company's annual financial report, and Form 8-Ks contain up-to-date information on actions and events material to performance.

To find these documents on EDGAR, search for a company's stock market ticker. If you don't know a company's stock market symbol, conduct a web search for either the bank or its parent organization.

In EDGAR, look for the “Company and Person Lookup” search box. Enter the ticker symbol in the box. The right-hand column should offer “Selected Filings.” Because 8-Ks are among the most searched for, the list of the company's most recent 8-Ks will be there.

Silicon Valley Bank's 8-K from March 8 appeared to focus on its plans to raise money through a new stock offering. The exhibits in the filing, however, disclosed a letter to investors noting that the bank had "sold substantially all of our Available for Sale (AFS) securities portfolio.”

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WHICH FEDS TO ASK ABOUT WHAT

Federal officials in regional offices may help dissect state and regional red flags. State banking regulators are even closer to issues on the ground.

While the U.S. Treasury's Office of the Comptroller of the Currency regulates nationally chartered commercial banks, its regional offices may be more responsive. Here's how the OCC regions break down:

The East Region covers federally chartered institutions based in Delaware, Washington, D.C., Indiana, Kentucky, Maryland, Michigan, Ohio and Pennsylvania, and some institutions in Illinois, New Jersey, Virginia and West Virginia.

The Northeast Region is responsible for Connecticut, Maine, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island and Vermont.

The South Region covers Louisiana and Texas.

The Southeast Region is for Alabama, Arkansas, Florida, Georgia, Mississippi, North Carolina, Oklahoma, South Carolina, Tennessee, Virginia and West Virginia, plus some institutions located in Colorado, Kentucky and Texas.

The Midwest Region is responsible for Illinois, Iowa, Kansas, Missouri, Nebraska and Wisconsin, and some institutions in Indiana, Kansas, Michigan and South Dakota.

The West Region covers institutions headquartered in Alaska, Arizona, California, Colorado, Hawaii, Idaho, Minnesota, Montana, Nevada, New Mexico, North Dakota, Oregon, South Dakota, Utah, Washington and Wyoming and some in Iowa, Nebraska, and Wisconsin.

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WHO ARE THE STATE REGULATORS?

As well as the federal institutions that regulate banks, each state has its own bank overseers, who can provide information about state-chartered banks. They also tend to be more in touch with the banks they regulate and more accessible to the press.

Here's a state-by-state list, along with contact information:

Alabama State Banking Department Phone: (334) 242-3452 Website: www.banking.alabama.gov/

Alaska Division of Banking and Securities Phone: (888) 925-2521 Website: http://www.commerce.state.ak.us/bsc/

Arizona Department of Financial Institutions Phone: (800) 544-0708 Website: https://difi.az.gov/

Arkansas Attorney General Phone: (501) 682-2007 Website: https://arkansasag.gov/

California Department of Corporations, Financial Services Division Phone: (866) 275-2677 Website: https://dfpi.ca.gov/

Colorado Office of the Attorney General Phone: (303) 866-4494 Website: https://coag.gov/

Connecticut Department of Banking Phone: (860) 240-8299 Website: http://www.ct.gov/dob/site/default.asp

Delaware Office of the State Bank Commissioner Phone: (302) 739-4235 Website: http://banking.delaware.gov/

Washington, D.C. Department of Insurance, Securities and Banking Phone: (202) 727-8000 Website: http://disb.dc.gov/

Florida Office of Financial Regulation, Division of Securities and Finance Phone: (850) 410-9805 Website: https://flofr.gov/

Georgia Office of the Commissioner of Insurance, Industrial Loan Division Phone: (404) 656-2070 Website: https://dbf.georgia.gov/

Hawaii Department of Commerce and Consumer Affairs, Consumer Resource Center Phone: (808) 587-3222 Website: http://cca.hawaii.gov/

Idaho Department of Finance Phone: (208) 332-8000 Website: http://finance.idaho.gov/

Illinois Division of Financial Institutions, Consumer Credit Section Phone: (888) 473-4853 Website: https://idfpr.illinois.gov/Banking.asp

Indiana Department of Financial Institutions Phone: (800) 382-4880 Website: https://www.in.gov/dfi/

Regulator: Iowa Division of Banking Phone: (515) 281-4014 Website: https://www.idob.state.ia.us/

Kansas Office of the State Bank Commissioner Phone: (785) 296-2266 Website: https://www.osbckansas.org/

Kentucky Office of Financial Institutions Phone: (800) 223-2579 Website: https://kfi.ky.gov/

Louisiana Office of Financial Institutions Phone: (225) 925-4660 Website: http://www.ofi.state.la.us/

Maine Office of Consumer Credit Regulation, Department of Professional and Financial Regulation Phone: (207) 624-8527 Website: https://www.maine.gov/pfr/consumercredit/index.shtml

Maryland Commissioner of Financial Regulation Phone: (410) 230-6100 Website: http://www.dllr.state.md.us/finance/

Massachusetts Division of Banks Phone: (617) 956-1500 Website: https://www.mass.gov/orgs/division-of-banks

Michigan Office of Financial and Insurance Regulation Phone: (877) 999-6442 Website: https://www.michigan.gov/difs

Minnesota Department of Commerce Phone: (651) 296-2135 Website: https://mn.gov/commerce/

Mississippi Department of Banking and Consumer Finance Phone: (601) 321-6901 Website: https://dbcf.ms.gov/

Missouri Division of Finance Phone: (573) 751-3242 Website: https://finance.mo.gov/

Montana Division of Banking and Financial Institutions Phone: (406) 248-2742 Website: https://banking.mt.gov/

Nebraska Department of Banking and Finance Phone: (402) 471-2171 Website: https://ndbf.nebraska.gov/

Nevada Financial Institutions Division Phone: (702) 486-4120 Website: https://fid.nv.gov/

New Hampshire State Banking Department Phone: (603) 271-3561 Website: https://www.nh.gov/banking/

New Jersey Department of Banking and Insurance Phone: (609) 292-5360 Website: https://www.state.nj.us/dobi/index.html

New Mexico Financial Institutions Division Phone: (505) 476-4885 Website: https://www.rld.nm.gov/financial-institutions/

New York State Banking Department Phone: (800) 342-3736 Website: https://www.dfs.ny.gov/

North Carolina Commissioner of Banks Phone: 919-733-3016 Website: https://www.nccob.gov/public/

North Dakota Department of Financial Institutions Phone: (701) 328-9933 Website: https://www.nd.gov/dfi/

Ohio Division of Financial Institutions Phone: (614) 728-8400 Website: http://www.com.ohio.gov/fiin/

Oklahoma Department of Consumer Credit Phone: (405) 521-3653 Website: https://www.ok.gov/okdocc/

Oregon Department of Consumer & Business Services, Division of Financial Regulation Phone: (503) 378-4140 Website: https://dfr.oregon.gov/Pages/index.aspx

Pennsylvania Department of Banking Phone: (717) 214-8343 Website: https://www.dobs.pa.gov/Pages/default.aspx

Rhode Island Department of Business Regulation Phone: (401) 462-9503 Website: https://dbr.ri.gov/

South Carolina State Board of Financial Institutions Phone: (803) 734-2020 Website: https://bofi.sc.gov/

South Dakota Division of Banking Phone: (605) 773-3421 Website: https://dlr.sd.gov/banking/

Tennessee Department of Financial Institutions Phone: (615) 741-2236 Website: https://www.tn.gov/tdfi/

Texas Office of Consumer Credit Commissioner Phone: (512) 936-7600 Website: https://occc.texas.gov/

Utah Department of Financial Institutions Phone: (801) 538-8830 Website: https://dfi.utah.gov/

Vermont Department of Financial Regulation Phone: (833) 337-4685 Website: https://dfr.vermont.gov/

Virginia Bureau of Financial Institutions Phone: (804) 371-9657 Website: https://scc.virginia.gov/pages/Bureau-of-Financial-Institutions

Washington Department of Financial Institutions Phone: (360) 902-8700 Website: https://dfi.wa.gov/

West Virginia Division of Financial Institutions Phone: (304) 558-2294 Website: https://dfi.wv.gov/Pages/default.aspx

Wisconsin Department of Financial Institutions Phone: (608) 261-9555 Website: https://www.wdfi.org/

Wyoming Division of Banking Phone: (307) 777-7797 Website: https://wyomingbankingdivision.wyo.gov/ ___

Associated Press editor Sal Christ contributed reporting from New York. ___ Localize It is an occasional feature produced by The Associated Press for its customers’ use. Questions can be directed to Katie Oyan at koyan@ap.org.