IDC provides a thorough analysis of 24 financial ratios, resulting in a one-number summary rating computed for each financial institution in the country that reports to agencies of the Federal government. Ratings range from 1, the lowest, to 300, the top grade attainable. The result is a quick, at-a-glance financial strength assessment. This summary rank allows simple and direct comparison of the safety and soundness of any bank, savings institution, or credit union with any (or all) others.
IDC’s ranks of financial ratios also offer a unique opportunity for long-term risk management in institutions with investments in bank securities, such as brokered CDs, inter-bank loans or other structured products, with maturities 3 months or longer. A rank of 125 or higher has been determined by the users of IDC ranks as the investment grade benchmark. From 1990 to 2018, 89% of banks that failed were ranked less than 125 by IDC up to 17 months before failure, and 73% were ranked less than 125 up to 29 months before collapse.
IDC computes an estimate of probability of failure based on 531 bank failures since 2003. In banks ranked from 300 to 125, the cumulative probability rose gradually from zero to 5.5%. In banks ranked from 124 to 1, that probability increased at a higher rate, from 6% to 100%, as failures accelerated with falling ranks. IDC can provide an estimated probability of failure for each institution rank 1 to 300. The rank of a bank’s financial ratios can be translated into an actual likelihood of failure and that probability can be used to assign a “value at risk” to any asset owned by a financial institution. Some asset categories include inter-bank loans, federal funds and CD underwriting inventory.
As a bank rating service, IDC provides a unique comparison of subsidiary bank ratings which are listed with the parent holding company rating. This allows the subscriber to view the quality and strength of the parent relative to the bank subsidiaries.
Bank, Savings Institution, and Credit Union ratings and supporting financial ratios can be viewed in a data base, through IDC's online portal, in a management review for a single institution, in peer groups, by region of the country, or through history of a financial institution.
IDC is continually refining the financial ratios to reflect additional financial data released by the regulators. Our rating is important for at-a-glance assessment, but more important is the ability we give you to determine the financial institution's strength and weaknesses and how each ratio impacts the summary rating.
IDC offers specialized bank rating services to subscribers with access to IDC qualified analysts when questions arise concerning ratings or methodology. The subscriber may know of unique circumstances for an institution that are not reflected in the standard regulatory reporting, circumstances which could change the inputs used in that situation.