Three bank failures in three weeks. More are expected this year. Could your institution be next?
Not likely. Most banks and credit unions are financially sound. And given the improvements to deposit insurance, Marylanders won't have to relive the panic of the 1980s when the Old Court Savings & Loan failed and took with it the state's private deposit insurance system.
Still, the recent headlines and the run on IndyMac Bank - which last month became the third-largest bank failure in U.S. history - don't inspire much confidence. Consumers are obviously concerned, as evidenced by the recent near-run on Eastern Savings Bank of Hunt Valley over an erroneous television report.
The Federal Deposit Insurance Corp., which insures deposits, says its site received more than 9 million hits a day in the week after IndyMac's failure, more than 10 times the usual number. People searched for updates on IndyMac, reviewed their bank's financial figures and checked their deposit insurance coverage. So how do you know if your institution is on safe or shaky ground?
It's not that easy.
"The regulators don't always know which banks are in trouble," says banking consultant Bert Ely. IndyMac, for instance, wasn't put on the FDIC's secret list of problem banks until June.
Indeed, it's more important to make sure your deposits are fully insured, so you're guaranteed to get your money back if your bank goes bust, than to try to figure out whether the bank is in trouble.
Nevertheless, here are some resources to use on both counts:
*FDIC's Web site: The FDIC publishes financial information reported by lenders quarterly and other historical information at www.fdic.gov under "Bank Find." The National Credit Union Administration publishes similar data on credit unions at www.ncua.gov.
If you like numbers, you'll find plenty of them on the FDIC site. But, frankly, they may mean little to you. Some, like assets and net income, are easy to understand. But there are many less familiar terms, such as tier 1 capital, total risk weighted assets and volatile liabilities, which just sounds dangerous.
A bank analyst can put these figures into perspective. Thankfully, you don't have to be one. Some research companies do the job for you. And they post their ratings of banks and credit unions online for free.
