Is Your Bank Safe? Tools To Help You Find Out

The banking crisis is alive and well in the United States. MarketWatch’s Robert Schroeder wrote on November 23:

The number of problem banks in the U.S. grew in the third quarter to the highest level in over 17 years, the Federal Deposit Insurance Corp. said Tuesday, even as the banking industry reported another quarter of healthy profits…

The number of troubled banks rose to 860 from 552 a year ago, the highest since the 928 institutions in March 1993. In the second quarter of 2010 there were 829 problematic banks…

The agency’s deposit insurance fund, meanwhile, remained in deficit at negative $8 billion.

So far this year, 149 banks have failed. From the UPI on November 20:

U.S. bank failures totaled 149 for 2010 by the end of the week, federal bank regulators said.

With failures of the First Banking Center in Wisconsin, the Gulf State Community Bank in Florida and the Allegiance Bank of North America in Pennsylvania, the Federal Deposit Insurance Corp. said bank failures for the year were now nine ahead of the total number of failures posted in 2009, The Wall Street Journal reported Saturday.

In comparison to the Great Depression era, during the 1920s an average of 70 banks failed annually across the country. After the October 1929 stock market crash throughout the first 10 months of 1930, 744 banks failed- 10 times as many. In one year alone- 1933- it’s estimated that 4,000 banks closed their doors. In total, 9,000 banks failed during that entire decade.

The U.S. banking crisis doesn’t appear to be going away any time soon either. Bloomberg’s Phil Mattingly wrote back in June:

U.S. bank failures through 2014 will drain $60 billion from the Federal Deposit Insurance Corp. fund that protects customer accounts in the event of a collapse, the agency said today.

“We expect bank failures to peak this year and start tapering off next year as the banking industry continues to heal and recover, but there are some uncertainties that lie ahead,” FDIC Chairman Sheila Bair said today at a meeting in Washington.

In light of all this information, how can one find out if their bank is safe?

Thankfully, a number of bank rating systems exist to help with this task. Three popular ones, Bank Star Ratings by BauerFinancial, Safe & Sound® by Bankrate.com, and Weiss Ratings on TheStreet.com, can be accessed on the Internet and are free of charge (BauerFinancial charges for more in-depth info about the institution being analyzed). Here’s a breakdown of the three free bank rating systems:

Bank Star Ratings by BauerFinancial

BauerFinancial, Inc. has been analyzing and reporting on the financial condition of the nation’s banking industry since 1983. According to their website, they have earned the reputation of “the nation’s bank rating service,” as hundreds of newspapers utilize their ratings for their readers. Ratings are derived from each bank and credit union being required to file a detailed financial report with federal regulators four times a year. BauerFinancial obtains this data in its raw form from the government. The quarterly data is subjected to a thorough analysis and is compared with historical data for consistency. Upon completion of the analysis, a star-rating is assigned based on a scale of zero to five stars with five stars being the strongest.

Bank Star Ratings by BauerFinancial

Safe & Sound® by Bankrate.com

Bankrate.com’s Safe & Sound® service is a proprietary system designed to provide ratings information on the relative financial strength and stability of U.S. commercial banks, savings institutions, and credit unions. The system applies more than 20 tests to each institution to measure that institution’s capital adequacy, asset quality, profitability, and liquidity. Individual performance levels are determined from publicly-available regulatory filings and are compared to asset-size peer norms, industry standards, and key absolute benchmarks. Combined results form the basis of the Safe & Sound® ratings. When possible, the system also produces a report that provides a detailed explanation of the findings for each rated financial institution.

Safe & Sound® ratings provide a star rating system to evaluate the current financial status of financial institutions. The most desirable rating is five stars; the least desirable is one. Performing institutions will generally receive a rating of three or more stars with the majority of financial institutions falling into the three- to four-star range. The top retail banks, thrifts and best credit unions will have a star rating of three or higher.

Safe & Sound® by Bankrate.com

Weiss Ratings on TheStreet.com

Every quarter, Weiss Ratings on TheStreet.com monitors the financial strength of 9,000 commercial banks, savings banks, and savings and loans across the nation. Ratings are derived, for the most part, from quarterly financial statements filed with federal regulators. Companies being rated are not granted the right to influence the ratings or stop their publication. Ratings are assigned by analysts based on a complex analysis of hundreds of factors that are synthesized into five indexes: capitalization, asset quality, profitability, liquidity and stability. These indexes are then used to arrive at a letter grade rating. A good rating requires consistency across all indexes. A weak score on any one index can result in a low rating, as insolvency can be caused by any one of a number of factors, such as inadequate capital, poor underwriting practices, operating losses, or the failure of an affiliated company.

Weiss Ratings on TheStreet.com

I decided to test the three bank rating tools out myself. Navigation-wise, all three are similar in that they are very simple to use. Information-wise, it’s a different story. Weiss Ratings on TheStreet.com only provides a letter grade rating for a particular bank. No other information is made available from what I could tell. BauerFinancial’s Bank Star Ratings also takes a minimalist approach, offering only a star rating for an institution when using the free search. However, as I mentioned previously, there are a variety of reports available for those desiring more information, starting at $10. Finally, there’s Safe & Sound® by Bankrate.com. Data-junkies like me will appreciate this rating system. Like BauerFinancial, Bankrate uses a star grade for each bank. However, Bankrate also provides a “Memorandum on findings” and “Financial statement” when possible as well. And the info provided is pretty substantial.

One more thing, perhaps a person is looking for a new bank and wants to find one that is “safe.” Weiss Ratings and Safe & Sound® is set up to do that as well.

All in all, when looking at a bank’s safety rating, if one wants to keep things simple (star rating or letter grade rating), Bank Star Ratings by BauerFinancial and Weiss Ratings on TheStreet.com accomplish this. If one wants to investigate further, Safe & Sound® by Bankrate.com is the best tool for the job. As for me, I’d use all three in looking at how safe my bank is. Obviously, there are no guarantees in life, and these ratings should not be relied upon exclusively in making banking decisions. However, they do offer valuable insights into a bank’s financial health.

(Editor’s note: Links to all three free bank rating systems have been added to the “Resources” page)

Sources:

Schroeder, Robert. “Problem banks grow in third quarter, says FDIC.” MarketWatch. 23 Nov. 2010. (http://www.marketwatch.com/story/us-problem-banks-grow-to-860-in-third-quarter-2010-11-23). 10 Dec. 2010.

“U.S. bank failures reach 149 for the year.” UPI. 20 Nov. 2010. (http://www.upi.com/Business_News/2010/11/20/US-bank-failures-reach-149-for-the-year/UPI-89981290270591/). 10 Dec. 2010.

Mattingly, Phil. “Bank Failures Through 2014 Will Drain $60 Billion From FDIC, Agency Says.” Bloomberg. 22 June 2010. (http://www.bloomberg.com/news/2010-06-22/bank-failures-through-2014-will-drain-60-billion-from-fdic-agency-says.html). 10 Dec. 2010.

Share

Tags: , , , , , , , , ,

Friday, December 10th, 2010 Banking, Essential Reading, SP Resources
Survival And Prosperity
Est. 2010, Chicagoland, USA
Christopher E. Hill, Editor

Happy MLK Day

Successor to Boom2Bust.com
"The Most Hated Blog On Wall Street"
(Memorial Day Weekend 2007-2010)

This Project Dedicated to St. Jude
Patron Saint of Desperate Situations



Please Rate this Blog HERE



happyToSurvive
Advertising Disclosure here. "Code Needed"=Promo Code Found On Advertiser Website. Ad Captions Last Updated 1/15/17.
ANY CHARACTER HERE
Buy Gold And Silver Coins Huge Silver Bar Sale (10 Oz. Individual & Monster Boxes)! World Gold (Bullion) Coins/Bars Also On Sale. Free Shipping On U.S. Orders $99 And Up (Only $5.95 Below $99!). BGASC Reviewed HERE.
ANY CHARACTER HERE
BullionVault World's Largest Online Investment Gold Service Taking Care Of $2 Billion For Over 65,000 Users From 175 Countries. BullionVault.com Reviewed HERE.
ANY CHARACTER HERE
1-Year Food Supply $1,597 + Free Shipping Limited Time Only; Alexapure Pro Water Filtration System $147; Big Savings On "Deal Of The Day" Page; Free Shipping On Orders Over $79. MyPatriotSupply.com Reviewed HERE.
ANY CHARACTER HERE
bullet proof vestsWorld's First Bulletproof Baseball Cap Only $129; Bulletproof Ceramic Plate (NIJ Level III Stand-Alone) Only $169; Bulletproof Backpack/Messenger Bag Panel Only $99. BulletSafe Reviewed HERE.
ANY CHARACTER HERE
Survival Titles Save 20% Discontinued Title Sale- Savings Up To 75% Off Original Price. Paladin Press Reviewed HERE.
 

Categories

Archives

Prepper Website

RSS Chris Hill’s Other Blog: Offshore Safe Deposit Boxes

  • Related Reading: Singapore Private Vaults ‘Have Quietly Begun To Bulge With Gold And Silver’
    I recently came across an article on The Business Times (Singapore) website which points out privately-owned precious metals from around the world are finding their way to non-bank vaults in Singapore. Andrea Soh reported on December 12: These are unsettling times. A recession looms. Extremist parties are on the ascent globally. One of the oldest […]
  • Next Degussa Numis Day To Take Place January 26, 27
    Degussa, a leading international player in the precious metals world which also offers safe deposit boxes (for customers) at branches in Germany, Singapore, Spain, and Switzerland, has posted information about the next Numis Day (first blogged about here) at their Geneva and Zurich showrooms. From their website: The Next Numis Day We appreciate and appraise […]
  • Related Reading: Martin Armstrong Covered By Washington’s Blog
    Regular readers of Offshore Safe Deposit Boxes know I bring up economist Martin Armstrong from time to time (case in point, the last entry) due to his views on subjects such as the War on Cash, gold confiscation, and safe deposit boxes. This afternoon Armstrong was the focus of a post published my other blog- […]
  • Martin Armstrong On Proposal To Seize ‘Suspicious’ Gold Entering European Union
    Last Wednesday, I wrote about a recent Reuters.com article which reported: The European Commission proposed tightening controls on cash and precious metals transfers from outside the EU on Wednesday, in a bid to shut down one route for funding of militant attacks on the continent… Authorities will also be able to seize cash or precious […]
  • One More Reason Why An American Would Need An Offshore Safe Deposit Box
    Back on March 2, 2014, I published a post entitled “Why Would An American Citizen Need An Offshore Safe Deposit Box?” Several scenarios were put forth: -Potential confiscation of legally-obtained and owned wealth by an Uncle Sam-gone-rogue -Increased asset protection via geographical diversification (“prepping” included) -Working/studying abroad, and requiring a secured container to store valuables […]