The Safest Banks in America -- 2nd Quarter 2012

The relationship between Americans and their banks used to be based on trust.

As well it should. In many ways, banks make some of our biggest financial dreams come true.

We go to the bank when we want to buy our dream home, and again when we remodel the kitchen. Our bank helps us buy that great new car we've been thinking about. When we retire, the bank turns a lifetime of savings into income by paying us interest on CDs, money markets and savings accounts.

We trust banks to protect our hard-earned money. We expect that every dollar we put into our bank will be held safe until we come back for it.

But what if the bank doesn't deserve our trust?

In America, we have let our guard down when it comes to our banking relationships. We assume that everything will be fine if our bank fails. After all, the FDIC insures our deposits up to $250,000. Why worry?

I hate to break this to you, but the FDIC's deposit Insurance Fund (DIF) -- aka, the money used to cover bank failures -- has been all but drained.

In 2007, the DIF had a healthy $52.4 billion. But since 2008 (after the housing meltdown), more than 413 banks have failed, and it's taken a devastating toll on the once-solid reserve fund.

According to the FDIC, the balance in the DIF is now just $11.8 billion -- almost 78% below where it was before the financial crisis. And though the fund will replenish slowly over time, the FDIC expects future bank failures from 2012 to 2016 to cost the fund $12 billion more.

I don't know about you, but I'm not willing to assume that the FDIC will always be there to cover my savings. Instead, I want to pick the safest bank in my area, so that I know the FDIC will never have to get involved.

So, to help Americans regain their sense of financial security and peace of mind that their money is safe, we've found a way to find the safest banks in America -- using a special metric called the "Texas Ratio."

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The Texas ratio was developed by a financial wizard at RBC Capital Markets named Gerard Cassidy, who used it to correctly predict bank failures in Texas during the 1980s recession, and again in New England during the recession of the early 1990s.

While the ratio has been excellent at predicting bank failures, it can also be used to find the banks that are the furthest from failure.

Without walking through the formula (which you can see here in our definition of the Texas ratio), the takeaway is this: The closer the Texas ratio gets to zero, the lower the bank's risk of failure.

Out of more than 7,300, there are just 359 banks in America with a perfect Texas ratio of 0.0. We list them below, sorted by state:

A note from the editor: "InvestingAnswers regrets the errors in the original report, where some of our Safest Banks had the incorrect location listed. This article is updated as of 8/10/12 to reflect the most accurate information, according to the FDIC."