How likely is MY bank to fail in the coming months?

July 12, 2008 7:11 PM

How can I evaluate the financial health of a US bank using publicly available records?

I know that I'm being paranoid, but the news that the failure of a single US bank could wipe out 10 percent of FDIC's deposit-insurance fund, and that more banks are expected to fail in the coming year, has me worried about the safety of my heard-earned dollars.

I'd like to get a feel for which banks have the most exposure to subprime loans and financial shortfalls because of the housing downturn. Not sure if there's anything else I should consider as I begin my research. How do I begin?

posted by croutonsupafreak to writing & language (11 comments total)

A lot of big banks report earnings this coming week, but what they report is not worth much. Bear Stearns went to the grave saying that liquidity was fine. Go to SEC.gov and find the bank's latest 10-Q filing. Look for Tier 1 asset coverage. You want it to be high. A lot of banks are around 8% or higher.
posted by Frank Grimes at 7:37 PM on July 12

Frank: can you be more specific about that sec.gov link? I went there to try to look up my own bank and none of the searches come up with anything.
posted by tinkertown at 7:56 PM on July 12

Type in the bank name or stock ticker here. If the bank is not a public company, they may not have to file financial statements with the SEC.
posted by Frank Grimes at 8:23 PM on July 12

It seems like the FDIC would also have that information, but I can't seem to find the right report for my small, local bank (which is not a public company). Maybe someone else knows what to look for in the FDIC's info?
posted by thebabelfish at 9:08 PM on July 12

BankRate will give you a simple star rating for a bank.

Do you believe the ratings agencies? You can look up what S&P thinks of your bank here.

You can read how AM Best rates a bank.

FDIC data is here, but it's not pretty or easy to understand.
posted by milkrate at 9:48 PM on July 12

I like the bankrate link that milkrate linked above. I was just looking at it today. You might take a look at their IndyMac memorandum so you know what it looks like 90 days before a bank goes under.
posted by ikkyu2 at 9:52 PM on July 12

I don't know how to best answer this question, but I do know how to use the FDIC site. Starting from milkrate's link, type in the name (or part of the name) of the bank you are interested in the "Institution Name" field and click find. Click on the cert number for the bank you want (check the location to be sure)- then choose your report and click on "generate report". The default, "assets and liabilities" seems like a pretty good snapshot to me.

However, as I understand it, these numbers are provided by the bank to the FDIC.
posted by Secretariat at 9:57 PM on July 12

Your deposits are not just backed by the FDIC fund, they are also backed by the "full faith and credit of the US government." You have the same assurance your $100k is safe as that your treasury bills will be repaid. It's a big deal.
posted by smackfu at 9:11 AM on July 13

smackfu has it right, although it's not strictly the answer to your question. The FDIC's insurance fund is only the top of the well it can call on. I wouldn't worry unless you have more than $100k.
posted by TrashyRambo at 10:11 AM on July 13

Look up the level-3-assets in the previous balance sheet. See how much this changes to the current balance sheet. An increase may be a hint for stress, since the bank is shuffling more and more into these dubious assets. Do the math, how much would these level-3-assets have to decrease in value that the owners equity becomes negative.
posted by yoyo_nyc at 11:12 AM on July 13

According to this article, 150 out of the 7,500 banks in the U.S. could fail over the next year. So there you go, 2% chance.
posted by Frank Grimes at 7:30 PM on July 13