Diving into the detailsIf you want to know more about a bank than a basic rating will tell you, Bankrate.com also offers free access to selected financial data for each institution. Some things to look for:
Ratio of nonperforming assets to total assets, an indicator of the scale of a bank's problem with bad loans. A ratio of less than 1% was traditionally the badge of a healthy bank, but the housing bust and mortgage meltdown have catapulted many institutions far beyond that threshold these days.
Equity-to-assets ratio. This is a bank's equity -- also known as its capital or net worth -- relative to its loans and other investments. The ratio is a measure of the bank's cushion against losses. IndyMac's ratio was 5.8% on March 31, its last public report. That compared with 8.2% at Bank of America, 8.9% at Beverly Hills-based City National Bank and 19.9% at Long Beach's Farmers & Merchants Bank.
Total risk-based capital ratio. This is a bank's capital adjusted for the riskiness of its loans and other investments. Look for 11% or better, advises Anaheim banking consultant Gary S. Findley. Although 10% meets the definition of "well-capitalized," Findley said, a ratio that low these days "raises regulatory concerns -- a lot of banks want to be 14%-plus."
Other data. The ratio of non-interest-bearing deposits to total deposits is essentially how much of the money a bank "borrows" from its depositors is interest-free. Higher is better. By contrast, the lower the ratio of loans to deposits, the stronger the bank will tend to be, at least from a depositor's perspective. A lower ratio of jumbo CDs and borrowings to assets is also a plus.
If you're especially intrepid, or suffer from insomnia, you can plunge into the quarterly reports banks and thrifts are required to file with federal regulators. These highly technical filings, known as call reports, contain a large amount of financial data. They are available online at https://cdr.ffiec.gov/public. There you can check out:
Past due and nonaccrual loans as a percentage of total loans and as a percentage of capital. These are loans on which borrowers are behind in their payments or have stopped paying altogether. If such loans exceed 5% of total loans or 50% of capital, that's a red flag and should be looked into, Findley said.
Brokered deposits. These are deposits placed by intermediaries on behalf of savers looking for the best rates they can get on substantial nest eggs. Less is better. "Too many brokered deposits raises potential liquidity issues," Findley said.
E. Scott Reckard