Submitted by Alan Boggs
Riverside Bank president in Brevard County
With reports in the news of some financial institutions facing problems due to subprime mortgage lending and the credit crunch, you may be wondering about the financial stability of the bank where you do business and the safety of your deposited funds.
How strong is your bank?
Banks are generally required to have significant capital and reserves - that is, rainy-day funds for tough economic times.
Federal regulators use three important ratios to determine how "capitalized" your bank is. In other words, how much capital your bank has on hand compared to the federally required amount to be considered "well capitalized" (see below). You can find these ratios for your banking institution by logging onto the Federal Deposit Insurance Corporation Web site at www.fdic.gov.
The three federally regulated ratio minimums for a bank to be considered "well capitalized" are:
. Tier 1 leverage ratio - 5 percent
. Tier 1 risk-based capital ratio - 6 percent
. Total risk-based capital ratio - 10 percent
Federally backed security
You can enjoy added peace of mind knowing that your deposits are federally insured through the FDIC, a U.S. government agency. The FDIC is backed by the full faith and credit of the U.S. government. Not one penny of insured savings has ever been lost by a customer of a federally insured bank. Each account holder's funds are insured up to allowable limits, which are at least $100,000, and retirement accounts such as individual retirement accounts and Keoghs are separately insured up to $250,000.
If your savings exceed the amount covered by the basic insurance limits, you can extend your FDIC coverage by establishing different types of accounts. The FDIC insures accounts in different ownership categories separately. You can get up to $100,000 of additional insurance for your interest in accounts owned jointly with someone else and for trust accounts of which you are a beneficiary. Check with your bank to find out how to set up your accounts to maximize your FDIC insurance coverage.
Some banks can provide FDIC coverage up to $50 million if they belong to a network called the Certificate of Deposit Account Registry ServiceŽ. You can find out if your bank is a member of the CDARS network and information about the program at www.cdars.com.
Put your mind at ease by doing a little homework to determine the safety and stability of your bank.
This article was submitted by Alan Boggs, Riverside Bank president in Brevard County. He can be reached at (321) 446-3686.