Sector Analysis · 7 min read · 2026-04-15
The 9 indicators of a stressed bank before the run.
Banking failures look sudden in the press but are visible in the call reports for quarters before. Nine indicators flag the trajectory.
Bank failures look sudden but are visible in the data.
When a bank fails — SVB, Signature, First Republic, Silicon Valley Bank — equity holders lose 100% and uninsured depositors face uncertain recovery. The signals that distinguished those banks from healthy peers were in their public call reports for two to six quarters before the failure. The screen is mechanical.
The nine indicators
The nine indicators of bank stress.
Each is in the FFIEC call report or the bank's 10-K. The composite separates structural soundness from creeping risk.
Uninsured deposit ratio above 50%
Threshold: > 50% uninsured
High concentration of uninsured deposits creates run risk. The 2023 failures had 90%+ uninsured ratios; healthy peers run 30–55%.
AOCI unrealized losses exceeding 25% of tangible equity
Source: 10-Q AOCI line
Held-to-maturity and available-for-sale unrealized losses are the silent capital impairment. Above 25% of tangible equity, the bank is on a capital-light tightrope.
Commercial real estate concentration above 300% of capital
Threshold: > 3.0× capital
FDIC and OCC consider 300%+ CRE concentration a regulatory concentration concern. Recent CRE distress is concentrated in office and high-LTV multifamily.
Loan-to-deposit ratio above 90%
Threshold: LTD > 0.90
High LTD signals dependence on wholesale funding for new lending. In stress, wholesale funding evaporates first.
Deposit beta high — paying up to retain deposits
Threshold: cost of funds > 4.5%
Banks losing deposits to higher-yielding alternatives (T-bills, money markets) raise their own deposit rates aggressively. The cost compression hits NIM and ultimately profit.
Tier 1 leverage ratio under 8%
Threshold: < 8%
Regulatory minimum is 4% but well-capitalized status requires 5%+. Below 8%, the bank has limited cushion for additional losses.
Texas ratio above 30%
Formula: NPL+OREO / Equity+LLR
Texas ratio measures non-performing assets relative to capital and reserves. Above 30%, historical bank failure rate climbs sharply.
Insider stock sales accelerating in trailing 6 months
Form 4 cluster
Bank executives selling at scale ahead of a broader awareness of stress is a recurring pattern across failed banks.
FHLB advances rising as a percentage of total liabilities
Threshold: > 15% of liabilities
Federal Home Loan Bank advances are emergency wholesale funding. Rising FHLB usage signals deposit pressure and balance-sheet strain.
Why bank failures cluster
Bank failures rarely happen one at a time. They cluster around regime shifts — interest rate cycles, real estate downturns, regulatory changes. The 2023 cluster (SVB, Signature, First Republic, Silvergate) was the result of a rapid rate-tightening cycle that produced AOCI losses across the banking system, particularly in regional banks with concentrated deposit bases and long-duration asset books.
The cluster is predictable in retrospect. The patterns — high uninsured deposits, concentrated industry exposures, large unrealized losses on long-duration securities — were visible in the FFIEC call reports for 6 to 18 months before the failures. The screen below assembles those patterns into a single composite.
Uninsured deposits and run dynamics
FDIC insurance covers $250,000 per depositor per institution. Deposits above that are uninsured. Banks with high uninsured concentrations are vulnerable to runs because uninsured depositors have direct economic incentive to flee at the first sign of stress.
SVB's uninsured deposit ratio was approximately 94 percent at the time of its collapse. First Republic's was approximately 67 percent. Healthy peer banks typically run 35–55 percent uninsured. The composition of the deposit base is the most important single risk variable for a regional bank, and it is disclosed quarterly.
AOCI losses — the silent capital impairment
Banks classify investment securities as held-to-maturity (HTM, carried at amortized cost), available-for-sale (AFS, marked through OCI), or trading (marked through P&L). When rates rose sharply in 2022–2023, the unrealized losses on HTM and AFS securities became substantial. Those losses are not reflected in regulatory capital for most banks, but they impair the actual economic capital meaningfully.
AOCI losses above 25 percent of tangible equity signal that a bank's regulatory capital ratios overstate the economic capital available. In stress, the unrealized losses become realized as the bank is forced to sell securities to meet liquidity needs.
What makes the screen actionable
FFIEC call reports are public, free, and updated quarterly. The composite screen runs in 20 minutes per bank using the call report's standard pages. For a holder of regional bank stocks or for an uninsured depositor, the screen identifies institutions worth additional scrutiny.
The screen is most valuable as a watchlist tool, not a real-time alert. Banks scoring 6 or more on the nine signals are concentrated risk; banks scoring 3 or fewer are healthy. The middle band is the zone where business-cycle outcomes determine the result.
What the screen does not predict
The screen identifies structural vulnerability. It does not predict the catalyst that triggers a run. The catalyst is typically an external shock — a sudden deposit outflow from a single concentrated industry (tech in SVB's case, crypto in Silvergate's), a regulatory action, or contagion from a peer failure. The structural vulnerability is necessary; the catalyst is sufficient.
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Common questions
Questions.
Should I move deposits if a bank scores 6+ on the screen?
Above-FDIC-limit balances should generally be moved. Below the FDIC limit, the deposits are insured and the operational disruption of moving may not be worth the risk.
Are too-big-to-fail banks immune?
Not immune, but functionally insured by the regulatory framework. The Global Systemically Important Bank (G-SIB) designation includes regulatory backstops that have not been credibly tested for ultimate failure.
Where do I find FFIEC call reports?
FFIEC.gov's Public Data Distribution. Free, structured data, downloadable per institution per quarter.
What's the Texas ratio threshold?
Above 50 percent has historically been associated with elevated failure risk. Above 100 percent is often pre-failure. The 30 percent threshold in the screen is conservative.
Are credit unions safer?
Different regulatory framework (NCUA insurance) but similar economic mechanics. Credit union failures are rarer in absolute terms; the same screen with adapted ratios applies.
How does the screen change for community vs regional banks?
Community banks (assets under $1B) have different risk concentrations. The CRE concentration ratio is more decisive; uninsured deposit ratios tend to be lower; the LTD ratio is the most binding constraint.
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