- Capitalization -- Measures how much of a company's assets are owned by the company or its shareholders, as opposed to being owned by creditors.
- Asset quality -- Assesses the loans in a bank's portfolio. It especially focuses on how many of them are delinquent or risky.
- Earnings -- This is the difference between revenues and expenses. It's the primary measure of a bank's profitability.
- Liquidity -- Measures how well the bank can meet the expenses required for day-to-day operations, including a surge in cash withdrawals by customers.
We use publicly available quarterly data from regulatory agencies in the banking industry -- the Federal Deposit Insurance Corporation Office of the Comptroller of the Currency and the National Credit Union Administration. The testing assigns a value to each of the Safe & Sound CAEL categories and calculates a composite rating for each institution.
More than 10,000 FDIC-insured banks and thrifts are analyzed and approximately 12,000 credit unions. The Safe & Sound CAEL rating should not be confused with ratings used by the FDIC or any other third party.
The strongest Safe & Sound CAEL rating is 1 and the weakest is 5, in accordance with industry standards. Bankrate.com has reversed this order in its graphic rankings for easy visual recognition.
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No report is available for institutions that don't have 5 quarters of historical financial data on file with the federal regulatory agencies. This may simply mean that the institution is too new to rate; it's not necessarily any indication of financial strength or weakness.
Financial institutions that show higher than normal asset growth are assigned a "G" qualifier in addition to their Safe & Sound CAEL rating. The "G" identifies institutions that have shown annual asset growth rates of 25% or greater. This rapid growth can be a sign of speculative, and perhaps imprudent, activity on the part of management. Regulatory agencies pay close attention to high asset growth that isn't a result of a merger.
The Safe & Sound rating feature provides comprehensive information about financial conditions of banks, thrifts and credit unions for:
- Industry professionals
This information is believed to be reliable but the information is not guaranteed. In addition, events since the information was collected may have altered an institution's financial condition.
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