Dude, where’s my bank?

2010 is the year I move my money. I’ve been too complacent for too long, and have been allowing those institutions who, while benefiting from huge taxpayer bailouts, to use that money to enrich themselves while drastically reducing local lending and fighting legislation that would regulate the reckless investment practices that got us into this mess. There’s no good reason to let this go on. In addition to advocating for shifting our money into sound community banks, I’m going to follow on with a post on the 5 Flags concept as a strategic way of diversifying risk while legally avoiding taxes, and another post on profiting from helping the little guy through peer lending. Personal freedom is about mobility and empowering choices, so here’s how I financially walk the talk.

It's time to sign off
It's time to sign off

I’m feeling the zeitgeist here, because no sooner had I put this plan in motion as one of my New Year’s promises, when political blogger Ariana Huffington wrote an editorial the same day entitled, “Move Your Money“.

This led me to the volunteer Move Your Money website, with a succinct and powerful message about why we should all be making this conscientious change right now.

I’ve been dealing with one of these too-big-to-fail institutions for over 15 years now, because they have kept acquiring my other banks, including my mortgage company. I know that such banks employ tens of thousands of people and are responsible for a big chunk our our economy’s financial services, so for sake of anonymity, let’s just call this institution “Skank of America”.

Just so you know, I really like the people who work at my local branch. They are lovely and helpful, until I have a real problem. Then I am sent to a special circle of hell, where I have a mind-numbing series of telephone conversations with people who seem to have all been trained by Deputy Dawg. In the end, no one is able to help me, because no one has the authority to solve, only to escalate, and eventually the issue goes up to someone who is sufficiently empowered not to care.

So I began looking at Viking Bank, literally across the street in West Seattle from Skank of America. It’s kind of frumpy looking, with no landscaping and an uber-gay three pink triangles logo. I noticed it every time I went to my auto parts guys next door and thought, “Hmm. This gay viking bank doesn’t get much business. Maybe it’s because they’re going after a very narrow customer demographic. Maybe if they included straight people and non-vikings, they might do better.” Then I realized, that this was just a local community bank that cared more about customers than branding and marketing.

Viking bank is small, with a capitalization of just over half a billion dollars. The bank was started in 1992 by a local obstetrician who found it difficult to get a loan for his successful practice, and now Viking has seven branches throughout Puget Sound. It’s board is made of original founders and experienced local banking professionals. Each community bank branch’s advisory group consists of local business leaders. They’ve been big supporters of local fishing industry and small private enterprise in the region.

Viking is barely on the bank ratings radar. People’s Bank, a lender that I’m assuming is run by communists in downtown Seattle, rates much higher. But even if your community bank is unrated or only gets one star, it may not be a big deal. Rating bank strength is really complicated and every rating agency has it’s own secret sauce. Things to look at include, management & board quality, assets, liquidity, core earnings, capital level, composition of deposits and regulatory compliance. All of this stuff is can be found in the bank’s annual report, usually through their website.

A nice tip from Move Your Money to help evaluate the financial strength of a bank is this rating tool from the Independent Community Bankers Association website, which you can then compare with Bankrate.com.

Most importantly, in terms of you not losing your money in case of default, is FDIC membership. This insurance program covers you for up to $100k per account per bank. Until 2013, the insured limit has been raised to $250k. Since the start of the FDIC in 1934, no depositor has ever lost a penny of insured deposits. Every year some banks fail, but 99% of them do not. So how do you know if your bank is in trouble? Look for these warning signs:

1. A long line of anxious people outside the door (natch)
2. An amorphous chalk outline of the bank’s CEO on the sidewalk
3. The bank has been renamed “Jamba Juice”

If you’re thinking, “Hey, Barclay, what about those of us with more than $250k in the bank? And aren’t gay vikings a threat to the institutions of traditional vikings?” My answer is that you are a silly person, because you should never have this kind of cash in the bank anyway, and the FDIC separately insures you for self-directed retirement accounts such as IRA’s and SEPs. Your joint checking is considered one account, while your spouse or children can have insured CD or savings accounts. Got more than half a million? You should know about 5 flags (not the theme park), which is the subject of my next post.

Going with a smaller community bank, even though it may lack the pizazz, big capitalization and ATM locations, will often give you higher yields, not charge you for basic services and have the same technology (online banking, bill payer, coffee pot in the lobby) as your gorilla banks. Best of all, these banks are far more likely to treat you like a human being and invest your money in other local institutions. Go in and have a talk with the bank manager to get a feel for the service and ask about their major investment holdings. Local industries: good. Collateralized Debt Obligations: bad.

I’ve initiated the balance transfer of credit cards, checking, money market, mortgage and other holdings all to Viking. Our money should stay with those local institutions that best serve the community. Too-big-to-fail will cease to be relevant when such banks no longer have our deposits. I hope all of you reading this, if you haven’t done so already, make this move now and help rectify the abuses of a system that our government seems unwilling to change.