Irony in the financial markets these days looks a little like this: An office building on Wolf Road with a drive-through branch belonging to the financially sound M&T Bank. And on a higher floor in the building is another banking office, this one belonging to the nation’s largest failed bank, IndyMac.

More than two weeks have passed since the U.S. Office of Thrift Supervision closed IndyMac following a run on deposits at the Pasadena, Calif., bank with $32 billion in assets. On July 14, the federally insured bank reopened under the control of the Federal Deposit Insurance Corp., but $1 billion in deposits held by 10,000 of the biggest depositors are potentially uninsured.

The failure of IndyMac has rattled consumers from coast to coast and made them question how safe their deposits are — even at the Capital Region’s relatively conservative financial institutions. This month, as publicly traded area banks post their second-quarter results, executives are increasingly providing reassurances about the quality of their companies’ liquidity and assets.

“We’re not seeing runs, walks or any concern. But I think our clients … are really trying to better understand what is insured, what the FDIC is all about,” KeyCorp Chief Executive Office Henry Meyer III said in a Tuesday conference call announcing the KeyBank parent’s second-quarter results.

Meyer noted KeyBank, which has over 50 branches in the Capital Region, saw an increase in deposits last week despite the run on IndyMac. But over the quarter, deposits grew only by 0.4 percent to $49.9 billion.

Even the Credit Union Association of New York responded to consumers’ banking anxiety. The Latham trade organization last week issued a news release saying credit unions “remain a safe harbor for consumer savings” and “as a whole are healthy and well capitalized financial institutions with strong balance sheets.” The Independent Community Bankers of America last week launched a counterattack to what it called “hype” and “unfounded concerns raised about the safety of bank deposits.”

“We’re having lots of questions. It’s natural,” said 1st National Bank of Scotia President John Buhrmaster.

Buhrmaster said concern is strongest among area retirees who have over $100,000 in their deposit accounts because that amount is the FDIC limit for insurance coverage per depositor.

However, that coverage figure can reach $200,000 for a couple’s joint account and $250,000 for some retirement accounts. Depositors can also expand their FDIC coverage by establishing payable-on-death accounts designated for other family members up to $100,000 each.

Growth spurt

The sudden skepticism over banks’ financial stability follows a nearly five-year period of robust and often rapid growth for the banking industry.

Some of that growth was fueled by the risky lending and aggressive deposit pricing practices whose consequences are now dragging the industry down.

Most banks in this area did not engage in the subprime or other alternative lending practices that have hobbled industry giants, such as IndyMac and Countrywide Financial. Earlier this year, Bank of America acquired the troubled Countrywide, a Calabasas, Calif., mortgage giant.

“It’s been five or six years of very profitable times for [community] banks, and it’s been a great time for them to build their capital. So the good news is banks are now as well capitalized as they’ve ever been,” said Chris Cole, the senior regulatory counsel for the Independent Community Bankers of America, a Washington, D.C., trade organization.

Although the bank failures remain rare — IndyMac holds 0.2 percent of the assets at the nation’s 8,494 depository institutions — they are spreading. IndyMac was the nation’s fifth bank failure this year, up from three in 2007.

The pace of failures is the highest since 2002, when 12 banks failed in the wake of the Sept. 11, 2001, attacks and the 2000 dot-com bubble burst.

The number of banks on the FDIC’s “problem list” is also growing. By the end of the first quarter, the FDIC noted 90 problem banks which were exhibiting financial, operational or managerial weaknesses. That figure stood at 76 by the end of 2007 and 50 in 2006. At the height of the nation’s savings and loan crisis in 1989, 1,513 banks landed on the problem list.

In response to the S&L crisis, Congress in 1991 empowered banking regulators to force banks and thrifts to raise capital to meet certain financial thresholds and reduce the risk of failures. The FDIC rates banks on a scale of 1 to 5, with a 5 representing the regulator’s highest level of concern. The agency neither publicly discloses banks’ ratings nor its problem list, but consumers have other options in determining safe places to put their money.

“Some people, all they want to hear is ‘Everything’s good.’ Others want specific bank [statistics],” said Kevin Timmons, the vice president and treasurer of TrustCo Bank Corp in Glenville.

For the latter group, financial reports filed with the FDIC each quarter provide highlights of depository institutions’ financial results.

Banking analysts frequently use figures pulled from call reports, quarterly reports and shareholder brochures to calculate key ratios that measure banks’ stability.

Numerous causes

Banks can fail for a plethora of reasons, ranging from a crushing load of bad loans to fraud. In announcing its closure of IndyMac, the Office of Thrift Supervision singled out Sen. Charles Schumer as the catalyst for that failure — the largest since Continental Illinois National Bank & Trust Co. went under in 1982.

The OTS cited the New York Democrat’s publicly aired letters voicing his concerns over the bank’s viability. Those letters, sent to banking regulators, stoked depositors’ anxieties and prompted them to withdraw $1.3 billion from their accounts over 11 days. That massive exodus of cash sent the bank into a liquidity tailspin.

Schumer, a member of the Senate Banking Committee, rebuffed the OTS’ claims he caused the nation’s largest ever bank failure. In a statement, he said: “The breadth of the problems at IndyMac were apparent for years, and they accelerated in the last six months. But IndyMac’s chief regulator was asleep at the switch and allowed things to happen without restraint.”

At First National Bank of Scotia, Buhrmaster said: “The failure of the bank may still have happened, but the run on the bank certainly wound not have” had Schumer not publicized his letters.

Burhmaster and other banking executives agree failures in the Capital Region are unlikely.

New York has not experienced a bank failure since Reliance Bank in 2004. Reliance was a White Plains bank with one office and $30.3 million in assets. Union State Bank in Orangeburg took over Reliance’s operations. KeyCorp in January acquired Union State Bank.

“There have been many economic cycles throughout our history, and Key has always been a safe place for our clients. And we plan to keep it that way,” said Meyer, at KeyCorp.