Leverage Ratio

A regulatory ratio defined by the federal banking regulators as core (tier 1) capital divided by tangible assets. This ratio answers the question: How much does the institution have in stockholders’ equity for every dollar of assets? Thus, the Leverage Ratio represents the amount of actual “capital cushion” the institution has to fall back on in times of trouble. We feel that this is the single most important ratio in determining financial strength because it provides the best measure of an institution’s ability to withstand losses.

Liquidity Index

A Weiss index that measures the institution’s ability to raise the necessary cash to satisfy creditors and honor depositor withdrawals. It is based on an evaluation of the company’s short-term liquidity position, including its existing reliance on less stable deposit sources.

Liquidity Ratio

The ratio of short-term liquid assets to deposits and short-term borrowings. This ratio answers the question: How many cents can the institution easily raise in cash to cover each dollar on deposit plus pay off its short-term debts? Due to the nature of the business, it is rare (and not expected) for an established bank to achieve 100% on this ratio. Nevertheless, it serves as a good measure of an institution’s liquidity in relation to the rest of the banking industry.

Loan Loss Reserves

The amount of capital an institution sets aside to cover any potential losses due to the nonrepayment of loans.

Loan Loss Reserves to Loans

The amount capital an institution sets aside to cover any potential losses due to the non-repayment of loans as a percentage of total loans.

Weiss Ratings