Examining the safety of your bank

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 Thrift Supervision 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 and about 12,000 credit unions are analyzed. The Safe & Sound CAEL rating should not be confused with ratings used by the FDIC or any third party.

The strongest Safe & Sound CAEL rating is one; the weakest is five, in accordance with industry standards. Bankrate.com has reversed this order in its graphic rankings for easy visual recognition. No report is available for institutions that don't have four 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 an 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 percent 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 Bankrate.com Safe & Sound rating feature provides comprehensive information for depositors, borrowers, creditors, industry professionals and regulators who need information regarding financial conditions of banks, thrifts and credit unions.

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.