Dedicated to Deposits: Deals, Data, and Discussion

Evaluate the Health of Your Bank

Evaluate the Health of Your Bank

The global financial crisis of 2008 has prompted many to take a second look at the health of their financial institutions. Many banks and credit unions may not be as financially healthy as you might think. So far this year, the FDIC has closed more than 80 banks, and there are more than 700 banks on the FDIC watch list. The NCUA, which is associated with credit unions, maintains a similar watch list, and there are more than 350 credit unions on that list.

If you are not concerned about the financial health of your bank or credit union, you should be. Many folks assume that because their accounts are protected by the FDIC or NCUA, there is nothing to worry about – even if the financial institution fails. For now (and until the end of 2013, unless the limit is raised permanently), accounts are protected for amounts up to $250,000. Those who have less than that amount in their accounts assume that there is no reason to worry about a bank’s health, since they will get their money. However, there are a number of inconveniences associated with having your money in a failed bank:

  • Difficulty getting your money: If a bank (or credit union) is found to take over running the failed bank, then the transition is often smooth. However, if the FDIC or NCUA does not have another institution lined up, you will have to wait for a check. Any number of complications can arise that can make it difficult to obtain your money in a timely manner.
  • Fees and hassles: If a bank is closed, un-cleared transactions are sent back. This can result in fees, interruption in service and other problems. You might eventually have the fees refunded to you, but the time lost can’t be recovered. Nor can the difficulty of having direct deposits and automatically withdrawals changed without prior notice.
  • Lost interest: Since you do not have access to your money, it is no longer working for you. You lose interest on money that you are waiting for. You can’t use that money for your benefit, and your CDs might see lower interest going forward.

Knowing the health of your bank can help you make informed decisions that are best for you before you are forced to change banks by a failure. You should evaluate the health of your bank or credit union now, and then decide whether or not it makes sense to move your money elsewhere if you are concerned about a bank failure. Keeping control of your money, and retaining access, is vital for those who are savvy when it comes to making their money work for them.

Learning About Your Bank’s Health

In order to prevent panic among customers and protect banks, the watch lists issued by the FDIC and the NCUA are secret. However, lists that include financial information about institutions are publicly available every fiscal quarter. It is then possible to use different formulas to determine the financial health of banks.

Deposit Accounts offers its own look at the financial health of banks and credit unions in the U.S. You can look up individual financial institutions and read about different factors contributing to the health of the bank. Some of the factors that can help you get a picture of your bank’s health include:

Texas Ratio

Developed at RBC Capital Markets, this is a relatively simple way to determine the overall credit troubles experienced by financial institutions. It is determined by comparing the total value of the funds available to the bank with the total value of at risk loans. The total value of funds available is decided by adding the loan loss reserves and the tangible common equity capital a bank (or credit union) has. In order to determine the at risk loans, the Texas ratio adds real estate owned and non-performing loans together. At risk loans that are backed by the government are filtered out.

The risky loans divided by what’s available can be expressed as a percentage. For example, KeyBank currently has $64.42 million in at risk loans, and only $56.12 million on hand to cover the possible deficiency. If you take 64.42/56.12, you get 1.1478. Multiply by 100 and you get a percentage: 114.8%. Anything approaching 100% and heading higher is considered poor. The closer you get to 100%, the greater risk. Bank of Hawaii, on the other hand, has $57.52 million in risks versus $989.15 million in positive assets, resulting in a Texas ratio of closer to 5.81%, which is quite good.

The Texas ratio is a quick way to tell, at a glance, the kind of credit risks your financial institution might be subject to. There is also a Texas ratio trend you can use. Check to see if your financial institution’s Texas ratio is rising or falling. If the ratio is moving higher, closer to 100%, that could be an indication that the situation is worsening for your bank or credit union.

Deposit Growth

Another consideration is deposit growth. When people put money in a bank, it is an indicator of confidence. It also increases the money that a bank has on hand, and can help strengthen the balance sheet of the bank. You can look to see the amount of total deposits that a bank has, and look to see whether they have been increasing over time. If a bank or credit union is seeing a drop in total deposits, it might be an indicator that failure is on the way, since it will no longer have the ability to keep a strong balance sheet.


Another quick, at-a-glance indicator of bank financial health is its available capital. You can figure available capital with a straight up of measure an institution’s assets minus its liabilities. Stronger capital means that there are more assets available to cover potential losses.

Market Share

You can also use market share data to help you determine the health of your bank. The FDIC offers information on market share on banks. Find out whether your bank has been growing relative to others, as well as view information on deposits and other information. There is a lag, so you might be dealing with older information, but it can still give you a solid idea of market share.

A careful survey of your financial institution can help you determine the health of your bank or credit union . Once you have the information about your bank, it is possible to make a more informed decision about the best place for your money.

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Comment #1 by KenBDG posted on
I want to thank Miranda for writing this article. Note, we no longer separate blog posts and articles like we did in the past. We made this change in an effort to consolidate content so it's easier to find.

For this article, we wanted to explain the Texas Ratio and other financial metrics that we use in deriving our health scores at Use the search box on the right to find your bank or credit union. Once you get to the bank page, click the health tab.

I have some additional reasons to be concerned with the health of your bank in this blog post.

Comment #2 by O Grady (anonymous) posted on
O Grady
keep up the good work Miranda it really helps 5 stars up

Comment #3 by Anonymous posted on
I think maybe many like myself may reconsider even useing banks out of state even if they seem to have a decent rating.  I just had an exasperating experience trying to get my closed CD balance returned to me overnight as they had agreed to do.  It cost me almost $62.00 in FedEX charges and time lost on interest I could have been earning had the bank been local and I could have had my funds same day.  I have made sure no CDs will be purchased from other states even if I have to take a bit less on the interest.  The stress of not knowing "when" my funds would be returned was worse than any money lost waiting.  However,  I must say,  I have, in the past, had nothing but good experiences with out of state banks.  Funds were wired.  This bank would not wire my funds back.  Something for customers to check into if they do out of state CD purchases.

Comment #4 by across the pond (anonymous) posted on
across the pond
well done miranda  maybe know ken can get some well deserved time off

Comment #5 by Anonymous posted on
do not understand when people pay compliments to ken and miranda they get negative votes speaks volumes for those who use this site

Comment #7 by rosie43 posted on
Assumed that if our bank was closed and another institution took it over that-- if writing checks and using the ATM were allowed during that weekend then all checks previously written but not cleared would go thru also. This blog always keep us up to date with everything. Thanks.

Comment #8 by Anonymous posted on
It says Deposit Accounts has places to check the health of individual banks. Where? I can't seem to find it on the site.

(Great site... but can't seem to find any particular place where I can input my bank's name to see how they fare, other than going to the 2 independent agencies pages like and Bauer). Where on deposit accounts can I find, for instance, the texas ratio for my bank? Thanks so much


Comment #9 by Anonymous posted on
#8 - See Ken's comment #1 up above

Comment #10 by Anonymous posted on
This site gives the Texas ratio of banks:  But there is no indication of when the list was generated or whether it is ever updated.

2 days ago, using one of the 2 sites I’ll list below, I was able to get a detailed summary of all the credit unions I wanted to look at. Today I can’t get that information. The summary concluded with a rating number for each (7 to 14) but I don’t know how to evaluate that number. Immediately after that rating number was the statement, in each case, “well capitalized.” These are the 2 sites I used:

Comment #11 by drjoanv posted on
I cannot find WHERE Depositaccts  allows us to check the health of a bank/credit union!  Where is it??

Comment #12 by t1945 posted on
To drjoanv,

To the right of the very first comment on this page is the word search. Click on bank and then put your bank or credit union's name in and click on search.

Comment #13 by Saverlessgal (anonymous) posted on
In reply to Anony #3's remark about out of town banks.  I recently, upon maturity, closed any out of town accounts I had for the same type reasons.  However, since interest rates have bottomed at practically all local banks, I have decided to try to use only banks within my same state which I can drive to open accounts in and drive back when they mature.  I give myself about a 50 mile radius so I can get there and back to my own city the same day.  Many times, a bank in another town in my same state will give a better rate.  It means doing a LOT of research on all the banks in my radius and checking not only their rates but their "star" ratings.  I will not use a bank which is not financially sound even for a better rate.  Just my own personal feelings about such things.  It is a pain in the butt to have to go to all this trouble to get anything near the rate I will accept but going to further away states and depending upon them to return the closed CD funds to me asap even electronically will no longer be a stressful issue for me.  That is, "if" I can find a bank within my driving radius with better rates!

Comment #14 by Atlas (anonymous) posted on
It seems like the Texas Ratios are not calculating correctly. My undertanding of caluclating this ratio by including all loans that are 30 days plus delinquent. It looks like these ratios only include reportable delinquencies which is 90 days for banks and 60 days for credit unions. These Texas Ratios appear to be not as conservative as other Texas Ratio calculations that I've seen.

Comment #15 by Frank (anonymous) posted on
Where can I find the site for texas ratio trends at

Comment #17 by Anonymous posted on
Very scary!  just deposited large sum of money in different bank as they are paying higher interest rate -   found out they have a 6.46% Texas Ratio - 

still not sure if that is all that bad?  don't feel like anythinng is safe anymore!

Comment #18 by Anonymous posted on
Sunrise bank of arizona is going to fail.

Comment #19 by Anonymous posted on
don't worry about your deposits.  The FDIC's got your back as long as you played by their rules.