Thursday, March 19, 2009

FDIC Says: Bank is Too Cautious with Customer Money!

The FDIC has criticized a Massachusetts bank, East Bridgewater Savings Bank, by branding it with a "needs to improve" rating under the Community Reinvestment Act. You know, the act that prodded many banks to make risk-heavy loans to people whose ability to repay them was (to put it kindly) suspect.

East Bridgewater Savings Bank's faults include the following:

  • Its ratio of loans to deposits was approximately 1/3 the industry average for banks their size.
  • They do not have a website.
  • They seem to focus on fixed-rate mortgages.
  • (And perhaps most egregious of all) They did not make risky loans to people whose ability to repay them was suspect. They seemed to limit their loans only to the credit-worthy.
In short, East Bridgewater Savings Bank is one of the most cautious banks in America. One article used the word "paranoid" in the title...and I think that was a complement.

And it should be! This cautious little bank in Massachusetts has demonstrated the lesson that there is wisdom in caution, and there is wisdom is not trying to stick your neck out to maximize a profit that is already adequate. And, yes, the bank made a profit (albeit a small one) last year.

I wish this bank were near my home town. I would put my money there!

No comments: