A. Most banks are publicly held and, therefore, are required to publish detailed balance sheet, and profit and loss information. Sometimes this information is available on their web site and many banks provide copies of their financial statements at their branch locations. All credit unions are required to file a quarterly report detailing all relevant financial information. You can find this information at ncua.gov, which is the website of the credit union regulating body, the National Credit Union Administration.
Your objective should be to determine the overall financial health of the organization that you have entrusted to assist you in managing your finances. You can best accomplish this goal by zeroing in on two key numbers, namely the capitalization and profitability of your financial institution. While a detailed analysis would require a lot of time, energy, and expertise, a quick look at these two numbers will tell you a lot. Capitalization may best be described as the institutional equivalent of the equity in your home. It is the retained and undivided earnings of the organization and is best viewed as a percentage of the assets of the organization. That percentage will vary greatly among banks and credit unions, but as a frame of reference, a credit union is considered well capitalized if its capital is equal to or greater than 7% of its assets.
Profitability is pretty straightforward. Is your bank or credit union making money and, if so, how much? If not, how long have they been losing money and what is the plan to turn things around?
Be sure to check Scott's Spot on Patrolmen's Dispatch for financial tips and CEO Scott Arney's Serial Decision Maker series.