Principal Bank: Common Equity Tier 1 Capital Ratio

The CET1 ratio measures a bank's highest-quality capital (common stock and surplus, retained earnings and, for banks that have not opted out, accumulated other comprehensive income, less regulatory deductions) against its risk-weighted assets. It is the most-watched single capital indicator in US bank supervision after the 2013 Basel III reforms.

Most well-managed US community banks report CET1 ratios between 11% and 16%. Ratios above 14% generally indicate comfortable capital cushions; below about 10% a bank sits below most community-bank peers, though still above the regulatory lines of 4.5% (minimum), 6.5% (well capitalized) and 7% (buffer). The bands below are BankRegReports analyst bands, not the prompt corrective action categories. The CET1 ratio should be read alongside the Tier 1 leverage ratio (which doesn't weight assets by risk), since a bank can have a high CET1 ratio while still being thinly capitalized on a leverage basis.