How to Compare Problem Banks
The Federal Deposit Insurance Corporation (FDIC) publishes detailed information about the finances of all registered banks that is updated regularly. This database is accessible to the public although it can be difficult to interpret for the untutored eye. There are several key figures that determine how solvent a bank is, primarily relating to the deposits that the bank has on hand compared to the loans it has outstanding.
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Instructions
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Use the FDIC database to compare problem banks. (See Resources 1) The FDIC also publishes a problem bank list that will assist you in identifying which banks have shaky financial foundations.
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Examine the ratio of total deposits to loans outstanding. The lower that this ratio is, the more risk the bank has of failure. Most solvent banks have ratios of about 1:1 while banks that may fail tend to lose deposits rapidly, reducing this ratio to 1:2 or less.
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Compare the total dollar value of loans outstanding on the FDIC report to the dollar value of loans that are in delinquency. Delinquent loans are 60 days or more late in payments and have a high probability of entering default. If a bank has more than 10 percent of its loans in delinquency, it's in danger of closure.
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Note these values and compare them to other banks that you're looking at. Extrinsic circumstances, such as government bailouts and guarantees, may make it so that this method is less accurate for predicting bank failure, but it's still the best data available to the public.
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