How to Find Safer, Smaller Banks for Your Money Using Our Weiss Ratings Screens

During the Great Financial Crisis, the biggest banks were some of the hardest to fall (or fail!) If you’re the type of person who prefers safer, smaller banks for your money – to help you sleep at night – then that’s where our Weiss Ratings Bank Safety Screener can help.

Not familiar with the screening tool? Well, it’s designed to identify banks where stability, trust, and a solid foundation are prized. You can use the tool to develop a powerful set of banks that have quality assets and that do business the way you expect — with the depositor in mind.

For example, I recently set up a screen that looked first at asset quality, a proprietary Weiss index that sifts out banks with sketchy loans by looking at past underwriting and investment practices and at each bank’s loss reserves. Reserves are how much capital institutions have on hand for rainy-day emergencies such as non-performing loans.

I chose only the top decile of banks nationwide based on quality. I then looked at return on assets, a profitability measure that compares net income to total assets over 12 months. Only banks exhibiting a return of 1% and above stayed on our list.

Finally, I looked specifically for mid-sized state banks with total assets above $500 million but below $1 billion. Sounds big, but that’s a fairly narrow band. The nationwide KBW Index of banks hold assets in the hundreds of billions of dollars, for instance. Think Citibank (Rated “B”).

Of course, I opted for our highest-rated banks, according to our own Weiss Safety Ratings data. I ended up with six banks — four in Texas, a fifth in New Mexico, and one in Tennessee — that made the cut.

The highest rated of the banks on my list was Citizens 1st Bank (Rated “A+”) in Tyler, Texas. It scored a 10 on our overall stability index. Citizens has operating profits as a percentage of assets of 2%, and the bank has been in business since 1920.

Second on the list was Citizens Bank (Rated “A+”) in Carthage, Tenn. Our system rated this bank a perfect 10 on both current capitalization and profitability. Profits as a percentage of assets is 2.9%, and Citizens’ asset quality mix came in at 9.6 on our scale. Citizens is a classic small-town community bank, backed by local borrowers and growing with the economy around it.

Texas Exchange Bank SSB, and Industry State Bank also both got “A” Ratings from Weiss in my screen.

Texas Exchange Bank had roughly 27% of its assets in securities and another 21% in commercial loans. The bank issues no mortgages. Industry State Bank, in Industry, Texas, lagged most banks in my screen with 1.8% profits as a percent of assets. But it also reported just 0.1% non-performing loans to core capital, a remarkable indicator of asset quality.

Citizens Bank (Rated “A-”) — yes, it’s the third “Citizens” bank brand, must be something that resonates with folks — is in Farmington, N.M. and another strong performer. Then rounding out the list was the First National Bank of Shiner (Rated “B+”) in Shiner, Texas. While lower in overall stability (It was the only bank rated below “A” on my screen), First National nevertheless scored 9.9 on asset quality.

What all of these banks have in common is a long history of doing banking the right way and being responsive to local needs. They’re exactly the kind of institutions you should seek to do business with.

If you don’t happen to live where they operate, however, don’t worry! You can set up your own, personalized screen by first using city or state as screening criteria. If you come up empty, consider the nearest large city or financial center. Then select limiting criteria, such as size and Weiss Rating. As you click through on each bank, you will be able to review in detail the bank’s actual position in terms of multiple quality factors.

Or if you already have a bank in mind, and want to see if it’s reasonably safe and sound, simply type the bank name in our search window at the top of the Weiss Ratings website. As you do, your institution’s name should pop up. Take a look and see how it performs according to our analysis.

After all, sleeping well is important for your health, financial and otherwise.

Think Safety,

Gavin Magor