ARKANSAS BANKS: SAFE, SOUND & INSURED

In light of the current economic climate we would like to take a moment and comment on the condition of our industry. Media outlets have a responsibility to report on the subprime crisis and market turmoil as well as the occasional bank failure. However, just one misleading headline can negatively impact consumer confidence, making matters even worse. We want to shed some light on this issue and offer some reassuring information.

Truth is the banking industry is safe and sound. Our industry, which is made up of federally in- sured, federally regulated commercial banks, thrifts and savings banks, is required by law to protect your depos- its. Even better, those deposits are insured. The Federal Deposit Insurance Corporation (FDIC) was created to protect depositor's money and has continued to do so since 1933. This means your bank account is protected up to $100,000 with additional coverage for joint accounts and as much as $250,000 for a retirement account. No depositor has to pay for this insurance and it is backed with total FDIC guarantees of $52 billion. We recognize that this economic down-turn has caused problems in our industry. Banks may fail and de- positors will be required to rely on their FDIC Insurance; however, there are certain benchmarks that must not be disregarded. Furthermore, when compared to the national average, Arkansas banks perform even better. Nation- wide capital is at historic highs with $1.36 trillion in capital, plus $120.0 billion in reserves, which are typically considered rainy-day funds for tough economic times. This is a bank's first line of defense to cover any losses. Banks in Arkansas outperformed the March 31 national average numbers for commercial banks regarding Return on Assets, Return on Equity and Total Risk Based Capital Ratio. Finally, those same statistics show that 96.5% of Arkansas' banks were profitable while countrywide that number was 87.13%. Bottom line - our banks are more profitable and better capitalized than the national average for all commercial banks.

One thing that is unique to the current situation is the use of the word bank. Not every business that calls itself a bank is actually an insured depository institution. Some companies use the term bank to add status to their name when they are actually un-regulated or under-regulated players in the financial services industry. Not all mortgage firms are affiliated with an insured depository institution and Bear Sterns was not a commercial bank. It was not an insured depository institution. It was an investment "bank."

Having a safe and sound banking system for the consumers to trust, shows the importance of the role banks play in our local communities and our nation's economy. They are the source of stability and of growth. That is true regardless of their asset size, their charter or their business plan. And the vast majority of banks today hold more capital than the law requires.

This crisis will pass and virtually all depositors and banks (federally insured depository institutions) will be fine. Just as has happened in the past, state and federal banking laws will protect depositors and the result will be a stronger financial system with fewer unregulated players. The Safest Place For Your Money Is Still The Bank.

By Kenneth D. Hammonds, President and CEO, Arkansas Bankers Association. For more information contact: 501.376.3741

The Arkansas Bankers Association is the state's oldest financial industry trade association, representing 156 commercial banks and savings institutions, their nearly 1,450 branch offices and 17,000 employees.

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