How to Test Your Bank's Vital Signs

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After the collapse of several high-profile U.S. banks, the Federal Deposit Insurance Corp. in October stepped in, boosting the amount of money it insures for each depositor to $250,000.

But while your money is safer now, many banks are still facing toxic mortgages, rising foreclosure rates and sinking commercial-loan portfolios. What’s more, the FDIC’s higher insurance rates will expire in December 2009. "That's not too far away, so consumers really need to be in a safe bank now," says Phillip van Doorn, a bank analyst with TheStreet.com Ratings.

So how safe is your money? Here are some key questions to ask to determine if both your bank and money are on solid footing.

What's at risk? If your bank fails, what will happen to your money? That’s a common question these days. The answer depends on how much is in your account. The FDIC previously guaranteed $100,000 per account holder per institution, but those limits, at least temporarily, were raised to $250,000.

And different accounts are protected differently. For example, the FDIC provides up to $500,000 in coverage for joint accounts and recently waived its limit on non-interest-bearing checking accounts. If your money isn't fully covered under new FDIC rules, consider opening a new account at another institution. And be aware that the FDIC may reduce its insurance levels next December.

How does your bank stack up? Banks can be evaluated using a number of different benchmarks such as leverage ratio (the ratio of a bank’s equity to its assets) and capitalization ratio (the ratio of its capital to assets). Rating a bank’s stability also includes considering factors such as how much money it has set aside to deal with bad loans and how quickly it’s using up that money. To find out how your bank rates, check out the ratings offered on TheStreet.com’s Bank and Thrift Screener. To find your bank, enter its name and the state where it’s headquartered. The list includes 8,500 banks and thrifts in the U.S., and are graded from A+ (“excellent”) to F (“very weak). "If your bank has a grade of C- or less, start thinking about switching banks,” says van Doorn.

The ratings system provides a brief report detailing the basis for the grade. For example, Bank of America (BAC), headquartered in Charlotte, N.C., earns a rating of B-, meaning "good financial strength." The grade is based on excellent stability and good profitability and asset quality, according to the screening report.

Meanwhile, First Georgia Community Bank, headquartered in Jackson, Georgia, recently was given a grade or E-, or “very weak,” by the Bank and Thrift Screener. On Dec. 5, the bank was seized by federal regulators after suffering from rising mortgage delinquencies and foreclosures.

Where's the information? You also can access loads of information on your local bank directly from the FDIC. Commercial banking institutions must file a quarterly report of income and financial condition, called a Call Report, with their federal and state regulatory agencies. Click here to access Call Reports filed by your bank with the FDIC since 1998.

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