Although very rare in recent years, a bank of credit union's failure has the potential to be catastrophic to depositors who do not observe FDIC or NCUA limits.
The FDIC, NCUA and other regulatory agencies are constantly evaluating the health of their member institutions in order to be able to intervene before a failure. By using some of the same raw data that they use, it is possible to determine which institutions may be most at risk of their intervention, or a complete failure.
The Texas Ratio compares the total value of "assets at risk" to the bank's or credit union's loan loss allowance plus any equity capital (funds available to cover the losses) on hand to cover these loans. Assets at risk are ordinarily those that are more than 90 days past due and are not backed by any government agencies. A lower Texas Ratio is viewed as better and a higher one is cause for concern. It is viewed as an easy method of determining credit troubles that an institution may be experiencing.
A bank or credit union's capitalization is simply its assets minus its liabilities and is also another easy and reliable method of determining its health. A higher capitalization indicates that there are more assets to cover potential losses.
| Texas Ratio | Headquarters | Assets | |
|---|---|---|---|
| JPMorgan Chase Bank, National Association | 3.16% | Columbus, OH | $3,510,536,000 |
| Bank of America, National Association | 3.21% | Charlotte, NC | $2,550,584,000 |
| Wells Fargo Bank, National Association | 6.87% | Sioux Falls, SD | $1,719,839,000 |
| Citibank, National Association | 2.41% | Sioux Falls, SD | $1,678,936,000 |
| U.S. Bank National Association | 5.98% | Cincinnati, OH | $664,923,875 |
| PNC Bank, National Association | 6.26% | Wilmington, DE | $552,530,492 |
| Goldman Sachs Bank USA | 5.36% | New York, NY | $543,888,000 |
| Truist Bank | 3.06% | Charlotte, NC | $511,931,000 |
| Capital One, National Association | 8.16% | Mclean, VA | $477,304,264 |
| TD Bank, National Association | 2.71% | Wilmington, DE | $370,332,213 |
| The Bank of New York Mellon | 0.77% | New York, NY | $351,806,000 |
| State Street Bank and Trust Company | 0.73% | Boston, MA | $321,473,000 |
| Charles Schwab Bank, SSB | 0.11% | Westlake, TX | $273,816,000 |
| BMO Bank National Association | 4.87% | Chicago, IL | $261,999,062 |
| First-Citizens Bank & Trust Company | 5.65% | Raleigh, NC | $219,685,000 |
| Citizens | 8.44% | Providence, RI | $219,634,049 |
| Fifth Third Bank, National Association | 3.37% | Cincinnati, OH | $212,484,000 |
| Morgan Stanley Bank, National Association | 2.63% | Salt Lake City, UT | $211,521,000 |
| Manufacturers and Traders Trust Company | 8.13% | Buffalo, NY | $208,377,728 |
| Morgan Stanley Private Bank, National Association | 2.31% | Purchase, NY | $207,569,000 |
| The Huntington National Bank | 4.53% | Columbus, OH | $195,864,166 |
| American Express National Bank | 4.45% | Sandy, UT | $192,276,019 |
| KeyBank National Association | 5.94% | Cleveland, OH | $184,963,242 |
| Ally Bank | 6.83% | Sandy, UT | $181,969,000 |
| HSBC Bank USA, National Association | 4.92% | Tysons, VA | $159,047,710 |
| The Northern Trust Company | 0.99% | Chicago, IL | $156,265,261 |
| Regions Bank | 6.03% | Birmingham, AL | $153,039,000 |
| Discover Bank | 9.57% | Greenwood, DE | $148,660,049 |
| Flagstar Bank, National Association | 24.55% | Hicksville, NY | $118,993,651 |
| Synchrony Bank | 9.26% | Draper, UT | $112,875,000 |
Those savings customers who are careful to stay within applicable FDIC and NCUA limits ordinarily do not need to be extremely concerned about bank health.
However, banks and credit unions that are on the precipice of failure may experience a decline in service and new offerings and pay lower interest rates on deposit accounts.
The FDIC and NCUA have in recent years have lined up acquiring banks for failed banks and credit unions. However, were your bank to be closed without an acquiror in place, you could experience delays in accessing your cash.
CD customers may be more at risk. An acquiring bank in a bank failure may lower the interest rate that it is paying on a bank issued CD. Brokered CDs could be redeemed in a failure, or their value in the secondary market prior to failure or at failure could be affected by a change in the credit quality.
Of course, borrowers with failing and failed banks face more challenges than deposit customers staying within applicable FDIC and NCUA insurance limits. Their payment procedures and contacts are certain to change, causing logistical problems. Those with delinquent loans, lines of credit, or certain types of business loans may experience new fees and costs, rate changes, and other time consuming challenges.