(MONEY Magazine) – Banks have enjoyed a surge in profits this year, but their newfound stability may not last. So don't get lulled into complacency by positive news about their earnings and stock price increases. You still do not want to deal with any bank that might fail. True, the nation's 14,344 banks and thrifts registered their best quarter ever in the first quarter of this year. And although 66 banks worth $21 billion failed before July, that too was a marked improvement from the 63 banks with $39 billion in assets that had crumbled by that time in '91. Still, the Federal Deposit Insurance Corporation, the agency that insures bank deposits, is sticking by an earlier prediction that 300 or more banks worth $168 billion will go under this year and next -- a greater loss than the , $153 billion assets of all 1,020 banks that failed in the previous five years (see the interview with FDIC chairman William Taylor on the next page). Even if, to lower the public's expectations, the agency is being deliberately gloomy, some kind of reversal appears inevitable. ''We've seen reality suspended so far in '92,'' says Alex Sheshunoff, president of his own bank consulting firm in Austin. He notes that banks are lending money at about 8% while paying only 4% on deposits -- a spread that is the largest in six years and that has helped boost profits. But earnings will dip if the spread narrows or banks suffer more real estate losses. The FDIC itself, under orders from Congress, has taken steps lately that could topple some shaky banks. As reported here last month, the agency has classified all banks as either well capitalized, adequately capitalized or undercapitalized. The 30% of banks in the last two groups are now forbidden to pay above-market savings rates and may owe as much as 22% more for their federal insurance next year. The FDIC went even further in June: It proposed creating a subcategory called critically undercapitalized; banks so labeled would be closed within 90 days unless there were extenuating circumstances. The rule will probably take effect in December; had it existed in June, regulators would have pulled the plug on 79 banks worth $27 billion. Even if you bank at a federally insured institution, you could face a hassle -- or worse -- if it fails. Depositors can lose money if their identically registered accounts (that is, those listed under the same name) total more than $100,000 per bank. ''If you're a borrower, the new bank that takes over your account can't call your loan -- provided your payments are current,'' says Bert Ely, a banking consultant in Alexandria, Va. ''But I've seen people open a line of credit to build a house, have it frozen when the bank fails and wind up with a half-finished home.'' One way to check on your bank is to order the free list of estimated capital classifications offered on page 29. Remember, though, that capital is only one measure of a bank's strength. So if your bank is listed as undercapitalized, you might order a more comprehensive study for $10 or more from an outfit like Veribanc (800-442-2657) or Bauer Financial Reports (800-388-6686; Bauer will tell you for free by phone if it considers your bank properly capitalized). Should your bank still look shaky, consider moving your business to firmer ground. ,

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