Everybody wants to deal with a safe bank. It will help you avoid money losses, headaches and stresses in the future. But how to tell that your money is in a safe place? There are several bank rating services that may help you foresee bank failures. They take into consideration banks’ strength, asset quality, profitability, and exposure to various risks. Don’t forget to check them before opening an account. 

The main factor in choosing a bank is FDIC insurance. It guarantees the safety of your deposit, currently up to $250,000 per owner per bank. Each insured bank must have an official FDIC sign. Another way to check whether a bank is insured by the FDIC is to call toll-free number 1-877-275-3342 or use "Bank Find" at www.fdic.gov/deposit.

After you make sure your deposits are insured, you can try to improve your chances of using a safe bank by checking its rating. Some of the most useful free services include: 

Star rating from BauerFinancial.com 

BauerFinancial has been analyzing financial condition of the American banking industry since 1983. The company applies a star-based rating, where the safest banks are 5 star rated. You can find out the rating of your bank by typing in its name on BauerFinancial website.

In order to determine the BauerFinancial star rating, the company takes into consideration the capital ratio, profitability, delinquent loans, charge-offs and repossessed assets, regulatory supervisory agreements, historical data and liquidity, etc. Financial data is compiled from call report data as reported to federal regulators.

Safe and Sound rating from Bankrate.com

Bankrate.com uses Safe and Sound rating system to provide information on the financial strength and stability of U.S. banks and credit unions. The company uses 22 tests to evaluate capital adequacy, liquidity, profitability and asset quality.

Safe and Sound is a star based rating, where the safest banks have 5 stars, the weakest banks – one star. The majority of financial institutions have 3 or 4 stars. The level of performance is determined from regulatory filings and compared to the standards of industry, asset-size peer norms, and key absolute benchmarks. 

Texas Ratio 

The Texas Ratio is a measure of banks’ financial health. Its formula will tell you how likely bad loans will drag your bank down. 

To calculate the Texas Ratio, you need to divide a bank's non-performing loans, including those 90 days delinquent, by the amount of its tangible common equity capital and loan loss reserves. If the number reaches 1:1, or 100%, the bank may fail. 

Read the news

With so much happening in the banking industry, it is easy to lose track of recent events. If you have an uninsured deposit, try to follow your bank performance by reading news. Is your bank constantly reported as a “high risk financial institution”? It is a bad sign. 

Of course, nobody can tell for sure what will happen in future, so there is a chance that you may be led astray. However, many newspapers told about the problems with Wachovia and Washington Mutual before they failed in 2008.

Keep in mind that no rating can guarantee that you will find the safest bank. However, these systems will help you make the right choice because even with FDIC-insurance any bank failure can become a serious problem.