RATINGS: IDC Financial Publishing Inc. [Box 140, Hartland, Wis. 53029] based its 1994 second-quarter ratings on the financial reports filed for the three-month period ended June 30 with the Federal Deposit Insurance Corp. IDC then calculates 38 financial ratios and compares those values for the various banks and produces a single rating for each institution. The chart also shows the rating of the previous quarter.
The rating of individual bank performance falls into six categories. The ratings categories are: 300-to-200, superior; 199-to-165, excellent; 164-to-125 average; 124-to-75, below average; 74-to-2, lowest ratios; 1, rank of one, (highest failure probability).
COLUMN 1 -- TOTAL ASSETS: Total assets of a bank or bank holding company in millions of dollars. A bank with $1 billion in assets would show an entry of 1,000.
COLUMN 2 -- EQUITY CAPITAL AS % OF ASSETS: Equity capital is a critical cushion to protect against possible future losses expressed as a percentage of assets. Equity capital includes the interest held in subsidiaries and preferred stock. This ratio is a key measure of a bank's financial reserves.
COLUMN 3 -- NONPERFORMING ASSETS AS % OF EQUITY: Non-accrual loans, restructured debt and repossessed assets, expressed as a percentage of equity capital, measures the relative size of the bank's loans no longer accruing, but that have not been charged off. This ratio reflects the level of substandard loans a bank has in its portfolio and can help project possible future losses.
COLUMN 4 -- NET INCOME AS % OF ASSETS: Income in the past 12 months, as reported, is divided by last year's average assets, expressed as a percentage. Also known as return on assets, this historically has been used as a common measure of a bank's earning performance, relative to its size.
COLUMN 5 -- STOCKHOLDERS' RETURN ON EQUITY: Net income in the past 12 months is divided by average total equity capital. A bank's earnings, compared with the level of stockholder investment, is also a traditional measure of a bank's performance, relative to its size.
COLUMN 6 -- INTERNAL GROWTH RATE OF EQUITY CAPITAL FOR THE PAST YEAR: The internal growth of equity capital is the reinvestment rate of retained earnings after dividends plus the change in the loan loss reserve, expressed as a percentage of capital and loan loss reserves held a year earlier. The internal growth rate of equity can indicate sustainable future growth.