A Transparent Rating Model

IDC Financial Publishing, Inc. (IDC) is one of a few nationally recognized financial institution rating and analysis firms, which provides the industry with standards in evaluating the safety and soundness of banks and bank holding companies, savings and loans and savings banks, as well as, credit unions.

How is your financial institution evaluated?

IDC uses a unique CAMEL analysis. Over 35 key financial ratios and a one-number summary rank are computed for each institution. The components of IDC’s CAMEL analysis are: Capital adequacy, Asset quality, Margins as a measurement of management, Earning returns, and Leverage/Liquidity. Quality ranks range from 300 (the highest) to 1 (the lowest), and fall into one of six peer group categories: Superior, Excellent, Average, Below Average, Lowest Ratios, and Rank of One.

Our firm calculates a preliminary rank of financial ratios about 60 days following the end of the reported quarter and a final rank approximately 100 days following the end of the reported quarter. As an example, for the quarter ending December 31, 2008, preliminary ranks will become available March 5, 2009. Final ranks are scheduled for release in April 2009.

The window between the preliminary and final rank for a bank, thrift or credit union allows the financial institution to receive an Advance Rating Report with their preliminary rank as well as supporting financial ratios, in order to:

1. Question the institutions’ rank calculations, given IDC’s evaluation is open, transparent, and easy to spot discrepancies
2. Correct call report errors
3. Alter financial ratios for one-time charges, such as nonrecurring charges not clarified in the call report data.
4. Evaluate the benefits of moving capital from the holding company to a subsidiary, or selling problem loans in the subsidiary to the financial holding company and evaluate the impact on your IDC rating.

The window between the preliminary and final rank allows a bank, thrift, or credit union to interact with our financial analysts – – a unique opportunity.

The better your rank, the greater your opportunity to lower the cost of deposits and increase your ability to grow deposits.

Paying attention to your rank provides long term rewards to your institution, its investors, members, and customers. Your best interests will be served if you work with a rating firm that has a transparent model and will share your rating with you prior to final publication.

John E. Rickmeier, CFA
President and Editor-in-Chief

Mr. Rickmeier has over 45 years of experience in evaluating financial institutions. In 1984, Mr. Rickmeier converted the regulatory accounting submitted in Call Reports to the Office of Thrift Supervision into Generally Accepted Accounting Principles (GAAP). With the GAAP database on thrifts and banks in 1985, IDC was uniquely positioned to analyze the Ohio crisis and subsequent failure of those institutions. Since 1989, 931 financial institutions have failed. Of this total, 98% were ranked below 75 (Lowest Ratios) up to 5 months prior to failure. As CEO of IDC Financial Publishing, Inc., Mr. Rickmeier designs and manages the processes and analytics used in the evaluation of bank or bank holding companies, thrift or savings banks, as well as credit union financial ratios, the value-added evaluation of bank investment portfolios and bank loan portfolios, and the efficiency analysis of the cost of funding a financial institution.

Mr. Rickmeier can be reached at IDC Financial Publishing, Inc., 700 Walnut Ridge Drive, Suite 201, Hartland, Wisconsin 53029, telephone 1-800-525-5457 or via email [email protected]. Visit IDC on the web at www.idcfp.com.