FDIC Bank Ratings: CAMELS Components, Scores, and Consequences

The FDIC and other federal banking regulators grade every U.S. bank and credit union using the CAMELS rating system, a confidential 1-to-5 scorecard built on six components: Capital adequacy, Asset quality, Management, Earnings, Liquidity, and Sensitivity to market risk. A rating of 1 means the institution is strong across the board; a 5 means failure is highly likely without outside help. You will never see your bank’s actual rating, because federal law keeps it confidential, but the score drives how often examiners show up, what the bank pays for deposit insurance, and whether it faces formal enforcement.

Who Assigns CAMELS Ratings

Four federal agencies use the same framework. The FDIC, the Federal Reserve, and the Office of the Comptroller of the Currency examine banks and savings associations. The National Credit Union Administration applies CAMELS to credit unions.¹ The formal name is the Uniform Financial Institutions Rating System, and it has been in use since 1979.²

Every examined institution receives a score for each of the six components and a composite rating that reflects the examiner’s overall judgment. The composite is not an arithmetic average. A bank with one weak area can still earn a strong composite if the rest is solid, and a bank with respectable numbers can be marked down on the composite if examiners find the management team unwilling or unable to address problems.

What Each Composite Rating Means

The 1-to-5 composite is the number that carries the most weight in supervisory decisions. Here is what each level signals about the institution’s condition:³

1 — Sound. Strong in virtually every respect. Any weaknesses are minor and handled through normal board oversight. These banks are most resilient to economic stress and get the least supervisory attention.
2 — Fundamentally sound. Only moderate weaknesses exist, and the board and management are capable and willing to correct them. Regulatory response is informal. Generally, no individual component is worse than a 3.
3 — Supervisory concern. Weaknesses range from moderate to severe, and management may not be moving quickly enough. The institution is more vulnerable to stress; failure is unlikely but not off the table. Regulators step up monitoring and may pursue enforcement.
4 — Unsafe or unsound. Serious financial or managerial problems. Without corrective action, viability is at risk. Close regulatory oversight is required and failure is a real possibility.
5 — Critical. Extreme problems, and failure is highly probable without immediate outside help. Weaknesses threaten the deposit insurance fund itself.

Banks rated 4 or 5 land on the FDIC’s problem bank list. The FDIC publishes the count each quarter without naming institutions. As of the fourth quarter of 2025, 60 banks were on the list, about 1.4 percent of all FDIC-insured banks, within the 1 to 2 percent range regulators consider normal outside a crisis.⁴ During the 2008 financial crisis, the list swelled past 800.

The Six Components Behind the Score

Capital Adequacy

Capital is a bank’s cushion against losses. When loans sour or investments drop in value, capital absorbs the hit before depositors are touched. Examiners look at whether the bank holds enough capital relative to the risks it has actually taken, not just whether it clears the regulatory floors.

Federal rules set several minimum ratios. The common equity tier 1 (CET1) ratio must be at least 4.5 percent of risk-weighted assets, the tier 1 capital ratio at least 6 percent, the total capital ratio at least 8 percent, and the basic leverage ratio at least 4 percent.⁵ Clearing the minimums does not automatically earn a strong capital rating; examiners also want to see a process for assessing capital needs against the bank’s specific risk profile.

Asset Quality

A bank’s assets are mostly loans and investments. This component measures how likely those assets are to be repaid and how much risk sits in the portfolio. Examiners look at the volume and trend of problem loans, the severity of classified assets, and whether the bank has set aside enough in loan loss reserves.⁶

Concentrations matter too. A bank that has funneled a disproportionate share of its lending into one industry or region is more exposed to a downturn there. Examiners also evaluate underwriting standards and whether management is spotting problem loans early.⁷

Management

This is the most subjective component and, in the view of many examiners, the most important. A well-run bank with mediocre numbers is in a better place than a poorly run bank with strong numbers, because those strong numbers won’t last. Examiners evaluate the competence of the board and senior leadership, the quality of internal controls, and how management responds when problems are identified.

Technology and cybersecurity feed directly into this rating. The FDIC assigns a separate IT rating and folds it into the management score.⁸ A bank with weak cyber defenses or poor IT governance loses ground on management even if its financials look clean.

For institutions with $10 billion or more in assets, the FDIC has proposed detailed corporate governance standards covering board responsibilities: a written strategic plan of at least three years, a code of ethics, a formal executive succession plan, and annual board self-assessments.⁹ Similar governance principles inform the management rating at smaller banks even where the formal guidelines don’t apply.

Earnings

Profitability keeps a bank alive. Earnings fund operations, build capital, and pay for growth. Examiners look at whether current profits are sustainable and high quality. A bank that leans on volatile trading gains earns less credit than one with a steady stream of interest income from a diversified loan book.⁶ Key metrics include net interest margin, return on assets, and the trend of net income. Erratic swings, one-time gains, or declining income pull the score down.

Liquidity

Liquidity is whether a bank can meet its obligations when they come due, without selling assets at a loss to do it. A profitable, well-capitalized bank can still fail by running out of cash at the wrong moment. Examiners review the mix of liquid assets, the stability of funding sources, and how the bank would hold up if depositors withdrew faster than expected.

Heavy reliance on brokered deposits or short-term wholesale borrowing draws more scrutiny. Examiners want to see contingency funding plans and access to backup liquidity, such as a Federal Home Loan Bank borrowing line.

Sensitivity to Market Risk

This component measures how much a bank’s condition could deteriorate if market conditions shift. For most community banks, interest rate risk dominates. A bank that loaded up on long-term fixed-rate mortgages funded by short-term deposits gets squeezed when rates rise, because funding costs jump while loan income is locked in.¹⁰ Examiners assess the quality of interest rate risk models, the assumptions behind them, and whether management stress-tests against severe scenarios. For banks with international exposure, foreign exchange risk is part of the review.

What the Rating Actually Triggers

Level of Supervision and Enforcement

The composite rating determines how aggressively regulators intervene. Banks rated 1 or 2 face routine supervision: periodic exams, report reviews, and flags on minor issues. A rating of 3 triggers more than normal supervision. Regulators at that level often issue an informal Memorandum of Understanding, which puts the board on record committing to specific corrective steps and a timeline.¹¹

Banks rated 4 or 5 face formal enforcement, which is legally binding and publicly disclosed. Tools include Cease and Desist orders, removal of officers or directors, and civil money penalties. At the extreme, regulators can revoke deposit insurance or place the bank into receivership.¹¹

Deposit Insurance Premiums

Every FDIC-insured bank pays a quarterly assessment to fund the Deposit Insurance Fund, and the composite rating is a major factor in setting the price. For established small banks insured five or more years, the total base assessment rate is 2.5 to 18 basis points annually for those rated 1 or 2, 4 to 32 basis points for those rated 3, and 13 to 32 basis points for those rated 4 or 5.¹² One basis point on a bank with $1 billion in assessable deposits is $100,000 a year, so the gap between top and bottom ratings can mean millions annually. For large and highly complex institutions, the FDIC uses a scorecard approach, but the composite rating still anchors the starting rate.¹³

Automatic Capital Restrictions

Separate from CAMELS-driven enforcement, federal law imposes automatic restrictions on banks whose capital ratios fall below set thresholds. This is the Prompt Corrective Action framework, and it operates on a five-tier capital ladder: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized.¹⁴ Falling below the well-capitalized bar blocks brokered deposits without a waiver; falling into undercapitalized territory forces a capital restoration plan, growth restrictions, and dividend limits; the critically undercapitalized level (tangible equity of 2 percent of assets or less) generally requires the FDIC to appoint a receiver or take other action within 90 days. These restrictions operate by law, without examiner discretion.¹⁵

Why You Can’t Look Up Your Bank’s Rating

CAMELS ratings are confidential by regulation. Examination reports and the ratings inside them are the property of the issuing agency, and disclosure without written authorization is prohibited.¹⁶ The OCC has warned that unauthorized disclosure by a bank can carry criminal penalties under federal law.¹⁷

The reasoning is that if depositors learned their bank was rated 4, many would withdraw immediately and turn a salvageable bank into a failed one. Confidentiality gives regulators room to work on corrective measures without setting off a panic. An interagency advisory has specifically pushed back on outside parties, such as insurance companies, that ask banks to hand over their ratings as part of underwriting.¹⁸

How to Read a Bank’s Health From Public Data

Since the rating itself is off-limits, the next best move is to look at the same financial data examiners use. Several free federal tools make this possible.

BankFind Suite. The FDIC’s BankFind Suite lets you search any FDIC-insured institution to verify insured status, view branches, and review the history of mergers and ownership changes.¹⁹ Start here to confirm insurance and get the FDIC certificate number you’ll need for deeper research.

Call Reports. Every insured bank files a quarterly Consolidated Report of Condition and Income. These are public and contain the full balance sheet, income statement, loan portfolio breakdown, and capital ratios.²⁰

Uniform Bank Performance Report. The UBPR takes Call Report data and turns it into ratios, trends, and, most usefully, peer group comparisons. Every ratio is shown alongside the average for similar-sized banks, with percentile rankings.²¹ Examiners use this same peer comparison approach and pay closest attention to ratios that stray significantly from peer averages. UBPRs are available through the FFIEC’s Central Data Repository at cdr.ffiec.gov.²⁰

Quarterly Banking Profile. The FDIC’s Quarterly Banking Profile aggregates industry-wide performance data, including earnings, loan trends, and the problem bank count.²² Use it for context on the environment your bank is operating in.

When you review a specific bank, focus on the ratios that map to CAMELS components. Capital ratios (CET1, tier 1, total capital, leverage) show the cushion. Non-performing loan ratios and net charge-off rates reveal asset quality. Net interest margin and return on assets reflect earnings strength. A bank that lags its peer group on several of these at once deserves a closer look, even if you can never see the actual rating behind those numbers.

1
National Credit Union Administration. CAMELS Rating System
2
Federal Reserve. Overall Conclusions Regarding Condition of the Bank: Uniform Financial Institutions Rating System
3
FDIC.gov. Composite Ratings Definition List
4
FDIC.gov. FDIC Quarterly Banking Profile Fourth Quarter 2025
5
eCFR. 12 CFR Part 324 Subpart B – Capital Ratio Requirements and Buffers
6
FDIC. RMS Manual of Examination Policies – Section 1.1 Basic Examination Concepts and Guidelines
7
National Credit Union Administration. Appendix A NCUA’s CAMELS Rating System (CAMELS) (Revised)
8
Federal Deposit Insurance Corporation (FDIC). 2022 Report on Cybersecurity and Resilience
9
Federal Register. Guidelines Establishing Standards for Corporate Governance and Risk Management for Covered Institutions With Total Consolidated Assets of $10 Billion or More
10
FDIC Examination Policies Manual. Rate Sensitivity Expanded Analysis Procedures
11
FDIC. Section 13.1 Informal Actions
12
FDIC.gov. Deposit Insurance Assessments Risk-Based Assessments
13
Federal Register. Assessments, Revised Deposit Insurance Assessment Rates
14
eCFR. 12 CFR 324.403 – Capital Measures and Capital Category Definitions
15
eCFR. 12 CFR 324.405 – Mandatory and Discretionary Supervisory Actions
16
eCFR. 12 CFR Part 309 – Disclosure of Information
17
Office of the Comptroller of the Currency. Supervisory Ratings and Other Nonpublic OCC Information: Statement on Confidentiality
18
Board of Governors of the Federal Reserve System (and other agencies). Interagency Advisory on the Confidentiality of the Supervisory Rating and Other Nonpublic Supervisory Information
19
FDIC.gov. Data Tools
20
FFIEC Central Data Repository. View or Download Data for Individual Institutions – FFIEC Central Data Repository’s Public Data Distribution
21
FDIC. Introduction to the Uniform Bank Performance Report (UBPR)
22
FDIC.gov. Quarterly Banking Profile