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November 2008

Checking Your Financial Institution’s Stability

I heard from many Consumer Checkpoint readers in October who are concerned about the safety of their money in financial institutions due to recent bank failures, mergers, and government bank-stock purchases. Certainly these are uncertain financial times. However, your local financial institution is one of the safest places to keep your money during this trying period.

As you may have heard, Congress passed new legislation authorizing the Federal Deposit Insurance Corporation (FDIC) and the National Credit Union Administration (NCUA) to insure deposits up to $250,000 through December 31, 2009. If you are married, you and your spouse each enjoy $250,000 of insurance coverage on jointly held accounts and an additional $250,000 of coverage on individual accounts at each financial institution.

A number of readers like this higher insurance amount. However, many also want to know how they can check the financial stability of their financial institution. First, the Wisconsin Department of Financial Institutions (DFI) collects and analyzes data from the state’s credit unions and banks. The information is positive. Wisconsin-chartered credit unions, for example, had a very low loan delinquency rate of 1.14 percent as of June 30, 2008, the latest reporting date with the state. This delinquency rate is actually down from the 1.27-percent rate reported on December 31, 2007. In addition, DFI has reported that the net worth ratio of credit unions is a strong 10.78 percent. Overall, DFI reported, “The financial indicators for Wisconsin credit unions exhibit sound financial performance for the first half of 2008 amid volatile and changing markets.”

State-chartered banks had a somewhat higher loan delinquency rate of 3.19 percent, which is up from 2.76 percent on December 31, 2007. However, this too is a relatively low delinquency rate. State banks had an average net-worth ratio of 10.3 percent, which while not as high as that for credit unions, is still relatively strong.

The state information only provides a snapshot of financial institution strength through June 30, 2008. However, there are several other information sources you may want to use that may be more up to date. One place is: www.bankrate.com/dls/safesound/ss_home.asp, a site run by Bankrate.com, one of the best providers of bank and credit union information on the Internet. Bankrate.com applies 22 different tests to measure a institution’s financial strength, including capital adequacy, asset quality, profitability, and liquidity. For federally chartered banks and credit unions, you may also check the official government websites at: http://webapps.ncua.gov/ncuafpr/
(credit unions) and  www.fdic.gov/bank/individual/bank/index.html (banks). You may check www.wdfi.org/fi/cu/financial_data.htm for state-chartered credit unions and http://www.wdfi.org/fi/banks/ for state-chartered banks. Be forewarned that the government sites can be a bit complicated.

Mortgage Payment Problems?

One of the unfortunate aspects of this economic crisis is the large number of people across the country who are unable to make their mortgage payments. If you know someone who is behind on his or her payments, you may want to recommend visiting the Federal Trade Commission’s “Mortgage Payments Sending You Reeling? Here’s What to Do” information site, which is at: http://www.ftc.gov/bcp/edu/pubs/consumer/homes/rea04.shtm. This site offers helpful tips on what do, including how to avoid loan default and foreclosure and how to avoid housing and credit-counseling scams.
Be careful out there by being an informed consumer. 

 

 

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