Personal Finance

The best and worst US states to bank in

Best and worst states to bank

ilbusca | Getty Images

If you are in need of a better bank, America's heartland might be the best place to keep your money tucked away. Three Midwestern states are among the best places to bank in the United States in 2013, according to a ranking by MoneyRates.com.

The report evaluated banks on the breadth of choice they offer customers, the stability of their banks, the quality of service, and how competitive their interest rates are on savings and money-market accounts. The information was compiled by Richard Barrington, senior financial analyst for MoneyRates.com.

Here are the five best and worst states to bank in. If your home state is on top, rejoice. If not, don't worry, says Barrington.

"Always remember that banking is a very fragmented industry, which means that there are lots of choices," Barrington said in a statement accompanying the report. "Nowadays, online banking is making choice even more widely available. So, if there is anything you don't like about your bank, shop around. There are always others out there."

And if you don't see your home state here, check out the full list.

—By CNBC.com
Posted 21 May 2014

1. Missouri

St. Louis, Missouri
Joe Sohm | Photodisc | Getty Images

Missouri's banking industry offers a lot of choice, good customer service and very competitive interest rates for savings and money-market-account holders, according to MoneyRates.com. Missouri's banking industry also stable: None of its 350 banks failed in 2013.

Of course, not everyone is a saint. The president of one Missouri bank was sentenced in March to two years' probation for using more than $380,000 of federal bailout money to buy a condo in Florida in 2009.

2. Kansas

Wichita, Kansas
John Coletti | Photolibrary | Getty Images

Like next-door neighbor Missouri, Kansas is home to many local banks, giving it a big boost in the rankings. In fact, banking giant Bank of America just sold 11 branches there to Kansas banks.

None of the state's banks failed, and two of them are noted in MoneyRates' list of America's Best Rates, which ranks the banks that offer the best rates on savings and money-market accounts. Finishing outside the top 10 in customer satisfaction kept Kansas out of the top spot, but its customer service ratings are still above average.

In a move that may bring more changes for the industry, Gov. Sam Brownback recently appointed a local bank president to the role of state banking commissioner.

3. Nebraska

John Coletti | Getty Images

Nebraska bankers apparently aim to please—the state ranks in the top 10 for customer satisfaction. There are not quite as many choices as Midwestern cousins Missouri and Kansas, but the number of banks is stable—no failures. Two of its banks are included on America's Best Rates list.

They are also thriving. The financial crisis and recession did not hit Nebraska as hard as it did elsewhere. Its banks' assets increased from $16 billion in 2005 to $35 billion in 2013, according to Gov. Dave Heineman's office.

Nebraska was still hit by the crisis, but found itself in much better shape in 2013 than it had been only a few years earlier. From 2007 to 2009, First National Bank of Omaha's number of loans not being paid "as agreed upon" tripled. But real estate did not devalue in Nebraska as much as it did elsewhere, and the state's farming industry remained strong, so the state is recovering reasonably well.

4. Massachusetts

mjbs | iStock / 360 | Getty Images

With many happy customers—fourth in satisfaction—Massachusetts also has a few more banks than the national average, giving its customers more choices.

None of its banks failed in 2013, although the Massachusetts Bankers Association says the number of banks declined by about a quarter since 2000, The Boston Globe reports. About 175 banks remain, and about 75 percent of them are mutually owned for the benefit of depositors, according to the Globe.

5. California

San Francisco, California
Noah Clayton | Getty Images

Finances in California cities may not be the best, but none of private banks failed in 2013 in the state that has among the highest number of banks. Two offer rates appealing enough to merit inclusion in MoneyRates' Best Rates list.

California is home to many banks of varying sizes, including one of the country's largest banks—Wells Fargo. Another relatively large bank—San Francisco-based First Republic Bank—was bought by its own management from Bank of America after BofA acquired First Republic's parent, Merrill Lynch.

46. Alaska

Kevin Morris| The Image Bank | Getty Images

When it comes to banks, Alaskans have less choice than the residents of any other state—which might make sense for one of the nation's least-populous states. Still, wherever they are going they are getting what MoneyRates says is least satisfaction in the country, perhaps because there's not much choice for consumers.

47. Washington

Philip Kramer | Digital Vision | Getty Images

Washington had one of the 10 highest bank-failure rates last year. Customer service ratings and breadth of choice were not so hot either, MoneyRates said.

Seattle was home to the ill-fated Washington Mutual, which was acquired by Chase during the financial crisis. Since the acquisition, the number of households using Chase in the Seattle area has actually declined. More people are apparently opting to bank with a local credit union called BECU (formerly the Boeing Employee Credit Union), according to The Seattle Times. BECU's business has grown tremendously— as of July 2013 it was second-most-used primary bank in the Seattle area, behind Bank of America., the newspaper said. The reversal is especially staggering, given the fact that WaMu had twice the number of customers when Chase acquired it in 2008.

48. Connecticut

SeanPavonePhoto | iStock / 360 | Getty Images

A high number of bank failures and a dearth of homegrown choices landed Connecticut among the worst states to bank. Good thing it's only a short train ride to New York, which ranked 9th.

49. Arizona

Phoenix, Arizona skyline
photoquest7 | iStock / 360 | Getty Images

Arizona had 2013's highest failure percentage—three of Arizona's 71 banks failed last year. Banks serving Arizona also earned among the worst average customer satisfaction scores.

While Arizona's banks are struggling, they are showing signs of improvement, according to the Arizona Daily Star. The number of "troubled" or "problematic" banks in the state fell in 2013, and the number banks receiving recommendations rose, as the state continues to battle the effects of the recession.

50. Nevada

Las Vegas on New Year's
Image source: Las Vegas News Bureau | Darrin Bush

The housing crisis hit Nevada hard, and the state's banking industry went right along with it. The Silver State is home to only 46 banks, so the one failure it suffered in 2013 gave it the second-worst failure percentage in the country. It is also the fifth-worst state for customer service, and eighth worst for consumer choice.

There, are however, bright spots. Nevada's banking sector also grew the fastest in the Rocky Mountain region in 2013, the Las Vegas Review-Journal reported. Banks are still reluctant to make real estate loans—especially for commercial projects—but loan portfolios are growing overall, it said. The lingering ramifications of the housing crisis still plague bank profitability as well—it is among the least profitable states in the region for banks.