With the failure of several large banks in this country, concern over the banking industry is merited. Since size doesn't seem to be an issue, both small and large banks cannot be immune from the possibility of failure.

Fortunately we have safeguards in place to protect and insure funds on deposit. Deposits are insured by the FDIC up to a limit of $100,000 per depositor. The question in considering your bank and other banks is how do you know if it is safe? While no method is foolproof, there are indicators of trouble or potential trouble. I want to be perfectly clear that these tips are only indicators and do not mean anything other than an overall indicator of issues. A simple solution is to spread your deposits over several banks to take advantage of the FDIC insurance limits per bank.

The first indicator is the amount of risk (loans) the bank has to its available capital. Most banks have minimum of 6% of reserves available for loan defaults. The more capital reserves a bank ahs may be an indicator of more financial strength. The higher the reserves, generally the better. Banks often refer to this category as the Total risk based capital ratio.

The second indicator is the loan to deposit ratio. The lower the ratio the better indicator of the strength of the bank. Banks can over loan and reduce ratio which would be an indicator of possible problems. A reasonable ratio is 95% of deposits to loans.

A third indicator is the percentage of loans in default of 30 days or more. These loans would be considered non-performing loans and would have an effect on the reserves of the bank and explained above in the risk capital ratio. Any percentage below 5% is a manageable number and will generally not affect a bank's ability to perform.

Even with FDIC insurance and other government agencies in place to assist and protect the consumer, it is important to know as much about your bank as possible. All banks will provide you the needed information for you to make the smart and correct decision.