Determining Your Banks Financial Health

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Have you ever considered investigating the health of your bank? I bet 99% of you reading this answered NO to that question…. You should, and here is why:

In the last 20 years, there have been 561 banks that have CLOSED. Bank failures have cost the FDIC (Federal Deposit Insurance Corporation) an estimated 100 billion dollars in the last 12 years in insurance claims.

So, when you have an account with a bank, you are FDIC insured up to $250,000 per account. Well guess what? If your bank fails, the FDIC should be paying you back the money that was lost during the bank failure, but it will take time. The keyword here is “should” though. Who knows what the future could bring but we aren’t going to talk a bunch of doom and gloom nonsense in this article.

Friends, you need to be aware of the health of your bank. There are banks closing. Banks close EVERY year… This happens. It is not some distant story told around a campfire. There was a bank that actually closed in my city. I drove by it one day and it was totally vacant. Come to find out, it CLOSED. This is what provoked me to do some research on the subject.

For many, this isn’t much of a concern though. Most Americans have very little in the terms of savings. The median household savings in this country was a measly $7,000 in 2016. Interestingly enough, for those making $160,000 or more, that number was $54,000 (which happens to be a solid number for your 12-month emergency fund). For the Elite Nurse Practitioner, you should be making $160,000 or more a year. With that said, this article is for you because you have A LOT of money saved compared to the average American, right?! (If not, do not worry, that is why many of you are here. To learn and grow.)

Beyond personal savings, a nurse practitioner entrepreneur will also have a considerable amount of money in their business accounts, personal checking accounts, and those savings accounts. This is why it is critical to understand the importance of finding out the financial health of your bank.

First and foremost, make sure your bank is FDIC insured. If you are using a bank that is not, then pull your money out of there immediately. Credit unions will be NCUA insured, which is the same thing for all intents and purposes (by the way, less credit unions tend, but they still do).

Next, you want to find out how the bank is graded and what their Texas Ratio is. The Texas Ratio is a simple equation where the amount of total funds the bank has on hand is compared to the total value of at-risk loans they have out. These at-risk loans are those that are delinquent by more than 90 days. For example, if a bank has $100 billion dollars in delinquent loans or non-performing assets and the bank has a total of $120 billion of cash on hand/equity, then the Texas ratio is 0.83 or 83%. This is really bad. Banks tend to fail when they hit a 1:1 ratio, or 100%.  Most of the riskiest banks in the country have Texas Ratios over 60%. My bank has a Texas Ratio of 0.32%.

You also want to look at how the bank is graded overall. Sometimes, the Texas Ratio can be 50% but the rest of their financials look solid, so their overall rating is okay. The overall grade is determined by their Texas Ratio, how many deposits they have coming in, and how much available capital they have. Anything under a B+ is unacceptable in my opinion. You work hard for your money; don’t you want it to be as secure as possible?

Check out where your bank ranks at the following link, just scroll down about halfway and type your bank in the search bar. You might be surprised:

I would advise putting your money into an A graded bank. My bank is graded at an A+ because I tend to be a little paranoid with my money, so that decision is ultimately up to you. If you search for your bank and it has a C grade, you need to find another bank immediately.

Is this an over reaction or just paranoid thinking? Probably… The FDIC will insure your money, but do you want to take that risk? What if you needed that money immediately? It will take some time to get the money back from the FDIC. It won’t happen over night folks.

Regardless, if you have considerable savings or have business accounts with a high 5 figure or even 6 figure amount chilling in it, then I would advise going to the healthiest bank you can find.

Do you need to stay local? I don’t think it matters anymore. Most banking is done online now a days. Look for a bank with a high rating that fits your needs and has low costs. Don’t stay local because you feel like you need to be loyal to the local bank. If they are rated low, then get your money out of there! You don’t owe them anything.

Now, go check the health of your bank!

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