Financial Health Of Banks - Judgment Q

stcharles
stcharles   |     |   13 posts since 2018

Considering Colorado Federal Savings Bank for 12-month CD at 2.86% APY ($5,000 minimum) with an early withdrawal penalty of 3 months of interest. The Financial Health is rated A, however deposit growth is a D "In the past year, Colorado Federal Savings Bank has decreased its total non-brokered deposits by -$104.01 million, resulting in -9.5% growth for the year. A strong track record of growth is an indicator of consumer confidence and the bank's ability to strengthen its balance sheet."

I do not know how to judge if the deposit growth of D should be red flag to not purchase a CD at this bank?

Texas Ratio - A+ - Texas Ratio Trend - A and Capitalization A+

Thank you.



Answers
Ken Tumin
Ken Tumin   |     |   6,051 posts since 2009
Deposit growth is a smaller component in our overall health grade than the Texas ratio and Capitalization. Colorado Federal Savings Bank scores A+ on both of those. That's why a "D" grade on Deposit Growth only takes them down to an "A" overall. I wouldn't say the "D" grade on Deposit Growth should be considered a red flag. That might explain their competitive CD rates.
stcharles
stcharles   |     |   13 posts since 2018
Thank you Ken for your reply. Helpful to know the Deposit Growth is a smaller component of the overall health grade.
Since this a.m. after some thought have decided to go with local Bank of Franklin County, MO. ncua insured - they have a promotion of 20 months @ 3.04% - 6 month ewp. I don't need the money any time soon. Figured it is a good rate for such a short time, and gives you protection in case CD interest rates continue to fall. For comparison, the current initial offering rate on 3-year brokered CDs is 2.60%.

Thanks. And to CTM yes, I understand your reasoning of purchasing below the NCUA limits - just prefer to have good financial health with an institution to begin with.
CTM
CTM   |     |   114 posts since 2010
If you are buying a CD and are below the FDIC limits, none of these metrics matter.


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