Weiss Ratings: Florida, Arizona and Georgia among Worst States for Safe Banking

JUPITER, Florida (February 3, 2011) — Florida, Arizona and Georgia are among the worst states1 for consumers seeking to avoid weak banks and bank failures, while West Virginia, Maine and Iowa are among the best, according to a new study by Weiss Ratings, the nation's leading independent provider of bank and insurance company ratings.

Among the banks and thrifts domiciled in Florida, a very large percentage — 79.1% — are considered weak, receiving a Weiss Financial Strength Rating of D+ or lower, based on their capital, earnings, asset quality and liquidity, while in Arizona the percentage is 71.8%. Also among the high-risk states are Georgia (with 67.9% of the banks weak), South Carolina (63.4%) and Washington (61.2%). In contrast, West Virginia, Maine, and Iowa boast the lowest percentage of weak banks — 10.6%, 13.3%, and 13.8%, respectively.

Nationally, Weiss rates 2,673 institutions "weak" or "very weak," representing 34.4% of the 7,747 receiving a Weiss rating.

"Many of the weak banks will probably avoid failure," commented Martin D. Weiss, Ph.D., chairman of Weiss Ratings. "However, we feel that, whether they ultimately fail or not, all harbor weaknesses that imply vulnerability to adverse financial or economic conditions." Only the banks receiving a Weiss rating of "very weak" (E+ or lower) — 468 or 6.1% of all banks rated — are considered very likely to fail, based on historical data.

Weiss added: "Bank failures in high-risk states is a problem that has been with us since the onset of the real estate bust, and one we feel is likely to continue into the future as well. With few exceptions, we find that states with the highest percentage of banks vulnerable to future difficulties are also among the states that have suffered the highest percentage of bank failures in the past."

In Florida, the Weiss study found that, on average, 5.1% of the banks and thrifts have failed each year since 2008. While in Arizona and Georgia the average yearly bank failure rates have been even higher — 6.6% and 5.5%, respectively. "With the exception of Nevada," Weiss said, "these are the three states with the highest bank failure rates in the nation, and our ratings tell us that their banking problems are far from over."

The Weiss study also explored the probable causes of the failure rates in each state — especially the relative depth of the real estate crisis and the state of the economy overall. Florida, for example, has the highest rate of home foreclosures in the nation at 13.7% and the third highest unemployment rate at 12%. Arizona's foreclosure and unemployment rates, although not as severe as those in some other states, are also very high.

In contrast, economic conditions in states with the lowest risk of bank failures are better. In West Virginia and Iowa, foreclosure rates are far below the national average, while in Maine and Iowa, unemployment rates are low.

Below are the states with the highest and lowest percentages of weak banks and thrifts, along with the bank failure rates and key economic indicators for each.

Advice for Consumers

Although the Federal Deposit Insurance Corporation (FDIC) covers accounts up to $250,000, if a bank is bailed out or taken over by the FDIC and sold to another institution, consumers can suffer adverse inconveniences. Specifically,

  • The FDIC does not cover investments consumers may have in bank-holding companies — such as common or preferred shares, bonds, and debentures.
  • The FDIC does not guarantee continuation of an interest rate, lines of credit, or other business that consumers may have with their bank.
  • And, given the state of the nation’s finances overall, it is possible that future FDIC coverage of failed banks will involve delays or other inconveniences.

Therefore, Weiss recommends that consumers seriously consider avoiding banks with a Weiss Rating of D+ or lower, while seeking to do most of their business with banks meriting a rating of B+ or higher. 

For a complete list of the 50 states of Weiss’ Best and Worst States for bank safety, go to www.weissratings.com/state-safety.

Plus, consumers can find a list of strongest banks in each state by registering at www.weissratings.com/banklists.

Weiss Ratings covers more than 7,700 banks and thrifts plus 4,200 insurance companies and also distributes independent ratings on the shares of thousands of publicly traded companies, mutual funds, closed-end funds and ETFs. Weiss accepts no payments for the ratings from the institutions it rates, deriving its revenues from the sale of its analysis directly to consumers.

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