How Bank Health Grades Work

Q: What does a Grade A bank mean?

A Grade A bank has an excellent health score (80-100/100). It has a Tier 1 capital ratio of 15% or higher, ROA above 1.5%, Texas Ratio below 5%, and efficiency ratio below 50%. These banks are well-capitalized and profitable.

Q: Is a Grade F bank dangerous?

Grade F banks have financial weaknesses, but your FDIC-insured deposits (up to $250,000) are still fully protected. A low grade means the bank may be struggling with capital, profitability, or loan quality, not that failure is imminent.

Q: What is the Texas Ratio?

The Texas Ratio measures non-performing loans divided by tangible equity plus loan loss reserves. A ratio above 100% indicates the bank could face losses if all its bad loans defaulted. Below 15% is considered safe.

The Four Pillars

Our health grade combines four metrics into a 100-point score, then converts to a letter grade:

How the 100-point health score is weighted

1

Tier 1 Capital Ratio 40%

core capital ÷ risk-weighted assets, loss-absorption capacity
2

Return on Assets (ROA) 25%

profit per dollar of assets, earnings durability
3

Texas Ratio 20%

troubled loans ÷ capital + reserves, credit risk
4

Efficiency Ratio 15%

operating cost ÷ revenue, cost discipline

Each pillar's share of the PlainBankData health score. All four are reported on the FDIC Call Report; weights reflect each metric's predictive value for bank distress.

40%

Tier 1 Capital Ratio (FDIC field: IDT1CER)

Core capital divided by risk-weighted assets. This is the most important safety metric. Regulatory minimums: 6% (adequate), 8% (well-capitalized). Exceptional banks maintain 12-20%.

Scoring: ≥15% → 40pts | ≥12% → 35pts | ≥10% → 28pts | ≥8% → 18pts | ≥6% → 8pts

25%

Return on Assets (FDIC field: ROA)

Net income divided by total assets (annualized). Measures how efficiently a bank uses its assets to generate profit. Industry average: ~1%. Above 1.5% is exceptional.

Scoring: ≥1.5% → 25pts | ≥1.0% → 20pts | ≥0.5% → 14pts | ≥0% → 7pts | negative → 0pts

20%

Texas Ratio (computed from FDIC fields)

Non-performing loans (NPLTOTAL) divided by tangible equity plus loan loss reserves (LNLSRES). A ratio above 100% is a serious warning sign. Below 15% is healthy.

Scoring: <5% → 20pts | <15% → 16pts | <30% → 10pts | <50% → 4pts | ≥50% → 0pts

15%

Efficiency Ratio (FDIC field: EEFFR)

Operating expenses divided by net revenue. Lower is better, it means the bank spends less to generate each dollar of income. Under 60% is efficient; over 80% is costly.

Scoring: <50% → 15pts | <60% → 12pts | <70% → 8pts | <80% → 4pts | ≥80% → 0pts

Grade Scale

80-100 pts

Excellent

65-79 pts

Good

50-64 pts

Fair

35-49 pts

Weak

0-34 pts

At Risk

Data Source & Limitations

All data comes from the FDIC BankFind Suite API, which aggregates quarterly Call Report submissions from all FDIC-insured institutions. Data is for Q4 2025 (REPDTE: 20251231).

Limitations: Not all banks report all fields. Banks without Tier 1 capital data (often very large institutions with consolidated reporting) receive scores based on available metrics only. Grades are informational, not investment advice.

Frequently Asked Questions

What does a Grade A bank mean?

A Grade A bank has an excellent health score (80-100/100). It has strong capital ratios, consistent profitability, minimal problem loans, and efficient operations. These are the financial strongest banks in the country.

Is a Grade F bank dangerous?

Grade F banks have financial weaknesses, but your FDIC-insured deposits (up to $250,000) are still fully protected. A low grade means the bank may be struggling with capital, profitability, or loan quality, not that failure is imminent or certain.

What is the Texas Ratio?

The Texas Ratio was developed by Gerard Cassidy at RBC Capital Markets in the 1980s to predict bank failures. It measures non-performing assets divided by tangible equity capital plus loan loss reserves. A ratio above 100% indicates the bank has more problem loans than capital to absorb losses.