Do you know the financial health of your bank? This site will give you a good idea of your bank’s financial health if you are willing to put a bit of work into it (Edit: For some reason the web site always reverts to the insures tab no matter what link I put in. Make sure you click on the banks and thrifts tab or none of this is going to make sense).

The first challenge when using this site is finding the bank that you want because the search function does not work.

For example, I tried searching for M&T Bank (which is the name the company advertises under) and did not get anything. I tried searching for Manufacturers and Traders Trust Company (the name the company is listed under) and did not get anything. So I gave up in disgust thinking that they did not have this bank in their database. Then when I was scrolling through their list of banks for New York, I found the bank listed under Manufacturers & Traders TC, Buffalo, NY. But even typing that into the search function will not bring up the bank.

In other words, the only way to find a bank is to narrow it down to the type (savings & loan or regular bank), state, and rating and scroll through the resulting lists.

The ratings are based off regulatory filings that the banks have to make with various government agencies and they range from A+ to E-. But by themselves these ratings don’t tell you much because you have no idea why a bank is rated the way it is.

But if a particular bank catches your eye, you can click on it and you will be taken to a slightly more detailed chart. Here is the chart for M&T for example.

Now if you look at the chart for M&T you will see that it still leaves a lot to be desired as far as the information offered is concerned. How do you define asset quality for example?

But if you want to do an in depth study of the bank, you should look up the banks regulatory filings for your self. The real value of the charts is that it gives you an idea of why the banks are rated the way that they are. You should use these charts to adjust the bank rating in your head based on your own particularly views. For example, M&T is ranked as a “B-” but I think that it should be a “C” at most.

If you look at the chart you will see that M&T is rated highly in only in profitability and stability. Now profitability is next to worthless as measure of a bank’s soundness. Granted, a bank that is losing money year after year will not stay in business for long. But high profits in a bank make me nervous. It could mean they are exceptionally well manged. But it probably just means they are taking on a lot of risk.

Stability is almost as worthless as profitability. This is because stability is a measure of a bunch of things, some of them relevant and some of them not. For example, the length of time a bank has been in business is factored into the stability ranking. That is an irrelevant data point. A bank that has been in business for 100 years can go bankrupt tomorrow just as easily as bank that has been in business for 10 years if all other things are equal. On the other hand, diversification is also factored into the stability ranking. This is relevant since a bank that has all its eggs in one basket are more likely to go under.

So the fact that M&T has a high stability ranking is slightly more encouraging then its high profitability ranking, it still does not reassure me much.

To make matters worse, M&T does not do very well on Capitalization, Liquidity, and Asset quality. To my mind, these are the most important indicators of a bank’s soundness. The fact that they are all on the low side makes me think that M&T should be rated a “C-” not a “B-“.

By contrast, check out the profile for ALDEN ST BK. It is rated “B-” just like M&T. But unlike M&T, Alden State Bank deserves its “B-“. If anything it should be rated higher.

You will notice that Alden Street Bank is less profitable then M&T. But you will also notice that Alden State Bank is way better capitalized then M&T. In fact, Alden State can’t get a better rating on capitalization then it has. Looking at the two charts, I suspect that this is the only reason that Alden State Bank is less profitable is that it has less leverage. That is a good thing.

You will also note that Alden State has a lower stabilization rating then M&T. But Alden State stabilization rating is still quite good. Given that M&T has 700+ branches and Alden State has 2 branches I suspect that Alden State’s lower stabilization rating is entirely due to its size. In fact, given how small Alden State is, it is pretty impressive that it manges to come so close to the stabilization rating of M&T.

A more damming comparison is to compare the two banks liquidly ratings. In a crisis, little Alden State will have more cash on hand (relative to its size) to deal with the problem then M&T.

Why is this important? Well look at the Asset quality of both banks and you will see that they both have poor asset quality. This means that both companies are likely to have big problems with people not paying back their loans. This is no surprise since both banks are based in upstate New York (although M&T has branches in other states). You are not going to find a lot of people with good credit up there.

But it looks like Alden State is prepared to face its problems where as M&T is not.

Thus, I think B- is an accurate rating for Alden State. It is the rating that you would expect a small but well run bank in a economically depressed area to have. But it does not seem to me that M&T should have the same rating.