The Federal Deposit Insurance Corp. (FDIC) provides safety and security for deposits up to the legal limit. Depositors with high balances can spread risk and maximize their insurance by structuring deposits among multiple banks.
If you hold deposits – checking, savings, CDs – how confident are you that your funds are safe and secure, and available on demand?
If your bank is an FDIC member, you can be certain your deposits are fully insured within statutory limits.
The Federal Deposit Insurance Corp. was established during the Great Depression in 1933. As many banks failed and others feared a run on deposits, the federal government set up the FDIC to restore confidence in the banking system. A run on deposits occurs when a large number of anxious customers close their accounts and demand their money, resulting in bank insolvency.
During the Depression, banks displayed stacks of cash in their front window, to show financial strength and reassure their customers. Today, banks display the FDIC insurance logo, which tells customers their deposits are guaranteed up to the full limit allowed by the government.
When depositors know their funds are guaranteed safe from bank failure, they are unlikely to panic and withdraw deposits. The result is consumer confidence and stability in the banking system.
The FDIC insures individual deposits up to $250,000, compensating the account holder in the event of bank closure or insolvency. Banks and savings institutions pay a membership fee to qualify for FDIC insurance, and submit to regular audits to verify their financial strength. The FDIC is funded by member institutions – no public or tax money is involved. At the close of 2018, the FDIC had 5,406 member banks.
Any person or business is eligible for FDIC insurance on bank deposits with a member institution. All types of deposits are covered: savings, checking and CDs. The $250,000 maximum applies per deposit owner, for each category of deposit, and for each member bank or institution.
Learn More About The FDIC
The FDIC offers tools and resources for consumers to learn more about their coverage. The website includes online seminars and videos, tips for first-time users, a support center and phone numbers for questions and complaints.
The FDIC’s electronic deposit insurance estimator (EDIE) calculator can be used to calculate insurance coverage for all types of deposit accounts offered by an FDIC-insured bank, including:
- Checking accounts
- Savings accounts (statement and passbook)
- Money market deposit accounts
Most personal deposits will not exceed FDIC limits. However, retirees with large 401(k) balances, wealthy individuals and government and institutional fund managers may surpass the $250,000 maximum.
For these large-balance deposits, Stearns Bank offers banking products to make account management easy and efficient. Solutions include structuring deposits among multiple bank charters and adding additional owners, ensuring that each deposit account meets requirements for full FDIC coverage. For example, a couple with two children can easily be covered up to $3 million by establishing multiple accounts at one FDIC institution.
Stearns Bank also partners with Promontory Interfinancial Network, a national network of banks, to extend FDIC insurance on high-balance accounts. Promontory distributes deposits among member banks to maximize FDIC coverage.
The service enables clients to maintain a single bank relationship, with one point of contact for managing deposit accounts – including consolidated bank statements. Promontory features the added security of managing risk across multiple institutions, convenience of working with a single bank and FDIC insurance coverage of over $100 million.
Choosing a Financial Institution
When selecting a financial institution, depositors should research the financial stability and historical performance of their bank. A bank with experienced management, established track record and strong reputation in the community will be the bank you want for your deposits.
In addition to FDIC membership, depositors should evaluate the strength of their financial institution and resilience to shifting tides of the economy. Stearns Bank has earned industry recognition for its strong capital position and sound financial management, including:
- American Banker magazine ranks Stearns Bank the "Top Performing Bank in the Nation" among banks with $2 to $10 billion in assets based on 3-year average return on average equity.
- Independent Community Bankers of America® (ICBA) recognized Stearns Bank as a “consistent high performer” among banks with assets greater than $1 billion.
- Trepp®, a leading provider of data and analytics, recognized Stearns Bank’s “bulletproof” balance sheet, and cited Stearns Bank as one of 20 national banks best positioned to withstand a downturn in the economy based on high capital ratios.
- The Stearns Financial Services Tier 1 leverage ratio for 2018 was 19.97 percent, nearly twice as strong as its peer group. The ratio indicates how well banks are positioned to withstand a negative shock to its balance sheet.