Banks are still failing at a fast clip, and though the bulk of the failures have been concentrated in a handful of states, like Georgia and Illinois, they can happen anywhere and at any time.
Scott Trubey, a banking reporter with the Atlanta Journal-Constitution, says he’s handled the large quantities of Georgia bank failures by cultivating a network of sources that provide him not just with tips, but with analysis that helps him draw his own conclusions. For every bank on his beat, he tracks quarterly FDIC data – some of which is synthesized for him by a local research firm (many of the big securities firms do this kind of work in their analyst reports etc.) The data can lead to a story all by itself, if an interesting trend appears; or it can be used to monitor which banks are on the cusp of failure.
Knowing that it’s a really bad sign for a bank to have a Texas ratio above 300 percent or a capital ratio of under 3 percent, and using the power of deductive reasoning, Scott knows which banks he should be preparing backgrounders for, so that in the event of failure, he’s got information at the ready and doesn’t have to scramble as much for story content.
When a failure occurs, you’ll usually hear about it first in a press release. Failures of state-chartered banks often are announced by state banking regulators before the FDIC announcement appears, so be sure you’re on the distribution list for releases from your state banking agency. The FDIC and OCC also have feeds you can sign up for or otherwise monitor. You also should monitor enforcement actions that any of the bank regulatory agencies announce against the banks they supervise; these can be signs of trouble. When regulators spot a problem, they will try to clear it up quietly and/or through an informal enforcement action, under a Memorandum of Understanding or MOU. Banks will disclose MOUs in their quarterly/annual SEC filings. If the MOU does not lead to a solution, a formal enforcement action is the next step, and if the bank still fails to do what’s required of it (to raise capital, to address a soundness issue, etc.) then that’s a bad sign for the future of the bank.
For more on covering bank failures, visit businessjournalism.org.