Months before the Bradford Bank's failure, the signs were there.
Since early this year, the Towson-based bank had been operating under greater federal supervision, and - more tellingly - regulators in July gave the bank 30 days to find a buyer or merge with another institution. Regulators seized the bank Friday and sold it to M&T Bank.
But banks often don't send up such red flares before failing. So what can you do to avoid being caught up in a failure?
There are sources to check up on the health of an institution. But far more easily than predicting a failure, you can make sure your deposits fall within federal insurance limits. So if your bank goes belly up, you're assured of getting your money back. After all, that's what's most important.
Eighty-four banks - two of them in Maryland - have failed this year, the highest number since 1992. Count on more to come; regulators certainly do.
The Federal Deposit Insurance Corp. recently reported it has 416 institutions on its problem bank list. The insurance fund at the end of June had set aside $32 billion to cover anticipated failures over the next year.
If you're a numbers person, you can look up your institution's finances online at www.fdic.gov under "Bank Find." The figures and lingo, however, can be difficult to digest if you're not used to them.
"Trying to figure out the condition of a bank is akin to brain surgery. It really is not easy," says banking consultant Bert Ely. And if fraud is involved, you're unlikely to know that the bank is cooking its books by looking at the numbers, he says.
The FDIC also lists the name of the main regulator of the bank, and you can search that regulator's Web site for information on enforcement orders against the bank. But enforcement actions aren't fail-safe evidence of a pending failure.
An enforcement action is never a good thing, but "it's not always related to safety and soundness, either," says Karen Dorway, president of BauerFinancial, which rates institutions on their soundness. The ratings, based on a star system, are available free at www.bauerfinancial.com.
Bankrate.com also offers free Safe & Sound ratings on institutions using a 5-star system. Bankrate's Greg McBride notes that failures this year represent a small percentage of the other 8,100 banks and thrifts. And Bankrate's top-rated banks and thrifts number 950, compared with 700 on the bottom, he says.
