Bauer’s Star-Ratings, that is. All Bank and Credit Union star-ratings are now updated and available at bauerfinancial.com. And, as we head into the new year, let’s try to set ourselves up financially for success. That means, in part, making sure all of your deposits are fully insured at strong institutions.
We reported in October (JRN 38:41), that, of the four “critically-undercapitalized” credit unions based on June 30, 2021 data, only one remained: Zero-Star Portsmouth Schools FCU, Portsmouth, VA.
A permanent resident of Bauer’s Troubled and Problematic CU Report since 2019, Portsmouth Schools FCU is a minority depository institution (MDI) that currently sports a regulatory capital ratio of –3.91% and Bauer’s Adjusted CR of –6.57. The one good thing we can say about it is that all deposits/shares are fully insured.
With the new September data, three more credit unions joined the critically-undercapitalized club. All three found healthy merger partners and all merged in October, leaving Portsmouth again as the sole critically-undercapitalized C.U.
This is important because, once an institution falls into this category, if it cannot find a merger partner, regulators have limited time to resolve (i.e. close) it. If that happens, uninsured deposits are put at risk.
Based on September 30, 2021 financial data:
- over 70% of our Nation’s credit unions have some amount of uninsured deposits/shares; and
- total uninsured deposits at our nation’s credit unions exceed $141 billion.
All federally-insured credit unions that are less than “Well-Capitalized” by regulatory standards and that also reported more than $2 million in uninsured deposits at September 30th can be found on page 7.
A deposit influx at our nation’s community banks during the past year, has put community banks in a similar situation:
- Uninsured deposits at community banks increased 26.8% during the 12 months ended September 30, 2021; and
- Estimated uninsured deposits at community banks now total more than $760 billion.
While we are very pleased to report that no U.S. banks are “critically undercapitalized” based on third quarter data, there is one “significantly undercapitalized bank”, Zero-Star Community Bank & Trust West Georgia, LaGrange, GA. Community B&T, like many other Georgia banks, ran into troubles during the Great Recession … and it’s been on Bauer’s Troubled and Undercapitalized Bank Report ever since.
Yet, the small, $92 million asset bank, still reports deposits in excess of the deposit insurance limit. A lot. At September 30th, Community B&T reported that 46 deposit accounts (not including retirement) exceeded the $250,000 insurance limit with $16.9 million potentially exposed in the event of a failure. Could one of those 46 accounts belong to you or someone you care about?
Your New Year’s routines should include a check to make sure YOUR deposits, wherever they are, are fully-insured. It should also include checking the ratings of both your depository institutions and any bank(s) where you might have a credit line. This is especially important for business owners, but applies to consumers as well.
Start your new year with the confidence that:
- Your deposits are fully-insured;
- The bank or credit union you use to pay bills from is strong;
- The institution used for any automatic deductions (auto insurance, etc.) is well rated;
- Any automatic payments you receive are going into a strong institution; and
- Any institution that you depend on in a credit crunch is healthy.
Some of these may be the same institutions, but in any case, it is worth the exercise. Ideally, we would like people to do this each quarter, but at a minimum, do it once a year to start the year on the right financial foot.
Then, pass this article on. If you have a parent, sibling or friend that could benefit from this simple advice, please share it. It really is surprisingly easy to exceed the deposit insurance limit, especially when your mind is elsewhere. Some common ways to inadvertently exceed the limit, even if for a short time, include: selling a house, cashing in stocks or bonds, an inheritance, cashing out your retirement plan, or even year-end bonuses (if you should be so lucky). Don’t risk it. Deposit insurance is a wonderful thing. Use it wisely. And always look to the stars.