GoodNewsBanking - Citizens Bank

Citizens Bank is proud to announce themselves as the only Ohio community bank to receive the 2008 BKD Award for Excellence & Innovation. The annual award recognizes high-performing banks that proactively ensure a healthy future for their bank and community.

Bob Cox, Senior Vice President, Citizens Bank accepts 2008 BKD Award for Excellence & Innovation from Bill Zumvorde, partner with the Cincinnati office of BKD, LLP.

Bob Cox, Senior Vice President, commented, “Our ‘Citizens in Action’ program is a formalized approach to volunteer efforts of Citizens Bank employees. The program was particularly helpful in responding to the Shelby community during the terrible flooding that affected us in August 2007. Our ‘Citizens in Action’ volunteers

For Two Major Banks, It was “too good to be true”
Despite their large amount of assets, two key players in the financial market have fallen due to the poor economy.

When you hear a deal that is too good to be true, it usually is. This is a lesson that two of the biggest financial institutions found out the hard way, unfortunately taking down thousands of innocent customers with them.

In March of 2007, Bear Sterns Central Bank was bought for pennies on the dollar by JP Morgan Bank with the assistance from the Federal Reserve. Bear Sterns began in 1923, and was one of the top investment banks in the financial industry. Within a matter of four days, the financial institution had completely dissolved.

Not long after, in the summer of 2008, IndyMac, a mortgage lender was given over to the control of the Federal Insurance Deposit Company, with all the customers running on the bank to withdraw their current accounts. By the end of this transition, this could be the most costly breakdown in the financial services, already being the second biggest financial failure in American history. Indy Mac had over 32 billion dollars in assets and was brought down to nothing from the on setting mortgage crisis and credit crunch.

With the fall of IndyMac, the FDIC is predicting that 10,000 customers could lose as much as $500 million in uninsured deposits. The fall of the housing market and the sub prime lending market has caused a credit crunch that is causing devastation in the financial sector.

The Federal Reserve played a large role in buying Bear Stearns because if Bear Stearns fell to the consequences of the marketplace, the entire financial industry would be affected, causing a meltdown that might not ever be fixed.

As the market fades further into a recession, there is no telling how many more big banks could be hurt and turn into the next Bear Stern or IndyMac financial crisis.

helped clean up schools, homes
and businesses in the community
and we developed a low interest
loan program to help residents
make needed repairs and get back
on their feet.”

The award, presented at the recent 34th annual Community Banker’s Association of Ohio (CBAO) convention, held this year in Chicago, recognized Citizens Bank for its demonstration of commitment, leadership and financial support to the communities it serves.

BKD Partner, and sponsor of this award, Craig Liechty comments, “Citizens Bank takes its place in the community seriously and demonstrates this through business and volunteer activities. It’s clear the ‘Citizens in Action’ program makes a positive impact on the communities where the bank operates. We were inspired by the action of employees who contributed to where help is needed the most, particularly in the days following last summer’s flooding. The example set by the bank’s leadership and its employees make it a deserving winner of the 2008 BKD Award for Excellence & Innovation and we are pleased to acknowledge them.”

With two of the nation’s largest bank collapses occurring within four months of each other, and with the recent news of larger regional banks having financial hardships, it stands to reason that the community may be taking a second look at their personal bank.

The capital idea
Just as you should have a “rainy day” fund for unexpected financial needs like new tires or repairing a furnace, a bank also has a rainy day fund called capital. The better a bank’s capital, the better its financial health. In fact, banks are required to report their capital as a ratio.

What happened to all these failing banks?
In an effort to improve their bottom line, some larger banks relaxed their standards for lending … meaning that they were taking larger risks on the money that they lent.
When the economy took a down-turn, payments on those risky loans stopped coming into the bank and they had to account for the reduction in income and for the potential that the entire loan balance had to be taken as a loss. These actions occurred very quickly and started eating into the bank’s capital (rainy day fund) in large amounts.

The result, reduced earnings, larger loan losses, fewer loans being issued, and a weaker bank overall. The bottom-line for the failed banks is that their capital was insufficient to meet the funding needs for continued operation of the bank.

Playing it safe
In contrast to larger banks, most local banks, like Citizens, have always maintained disciplined lending standards. Our goal is to locally loan money to those that need it, without putting the borrower in financial hardship.

Because our loans have always been more secure, Citizens has not been as affected by the down-turn in the economy. In fact, thanks to a healthy capital ratio (size of the rainy day fund compared to earnings), Citizens Bank has more money to lend and higher lending limits than ever before.