Safe and Sound

American Exchange Bank

Elmwood, NE
4
Star Rating
Founded in 1889, American Exchange Bank is an FDIC-insured bank based in Elmwood, NE. The bank has equity of $5.1 million on assets of $46.3 million, according to June 30, 2017, regulatory filings.

Thanks to the work of 10 full-time employees in 2 offices in NE, the bank holds loans and leases worth $27.7 million, including real estate loans of $14.7 million. U.S. bank customers currently have $39.9 million in deposits with the bank.

Overall, Bankrate believes that, as of June 30, 2017, American Exchange Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a breakdown of how the bank faired on the three important criteria Bankrate used to evaluate American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a bulwark against losses and provides protection for accountholders during periods of financial trouble for the bank. Therefore, when it comes to measuring an an institution's financial resilience, capital is crucial. When it comes to safety and soundness, the more capital, the better.
American Exchange Bank achieved a score of 14 out of a possible 30 points on our test to measure the adequacy of a bank's capital, beating out the national average of 13.38.

A bank's Tier 1 capital ratio is a widely followed measure of this buffer. American Exchange Bank's Tier 1 capital ratio was 15.03 percent, exceeding the 6 percent level regulators consider adequate, but under the national average of 25.16 percent. A higher capital ratio means the bank will be better able to weather financial headwinds.

Overall, American Exchange Bank held equity amounting to 11.03 percent of its assets, which was lower than the national average of 12.10 percent.

Asset Quality Score

In this test, Bankrate tries to determine the effect of problem assets, such as unpaid mortgages, on the bank's capitalization and allocated loan loss reserves.

A bank with lots of these types of assets may eventually be required to use capital to cover losses, cutting down on its equity cushion. It also means that there are likely to be many assets that are in non-accrual status and no longer earning interest for the bank, resulting in diminished earnings and potentially more risk of a failure in the future.

American Exchange Bank fell short of the national average of 37.62 on Bankrate's test of asset quality, racking up 36 out of a possible 40 points .

The percentage of problem assets a bank holds compared to its total assets is a useful indicator of asset quality.As of June 30, 2017, 2.12 percent of American Exchange Bank's loans were noncurrent -- in other words, they were more than 90 days past due or were in non-accrual status. That's above the national average of 1.04 percent.

Banks maintain a reserve known as an "allowance for loan and lease losses" to deal with problem assets . Comparing the the size of that reserve to the total amount of at-risk loans can be a handy indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on American Exchange Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability affects its safety and soundness. A bank can retain its earnings, giving a boost to its capital buffer, or use them to address problematic loans, potentially making the bank better able to withstand financial shocks. However, banks that are losing money are less able to do those things.

American Exchange Bank scored 18 out of a possible 30 on Bankrate's test of earnings, exceeding the national average of 16.52.

One important measure of a bank's earnings is return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity. American Exchange Bank's most recent annualized quarterly return on equity was 9.58 percent, above the national average of 9.28 percent.

The bank reported net income of $239,000 on total equity of $5.1 million for the twelve months ended June 30, 2017. The bank had an annualized return on average assets, or ROA, of 1.04 percent, above the 1 percent deemed satisfactory in accordance with industry standards, but below the average for U.S. banks of 1.14 percent.

WHAT IS SAFE & SOUND?

Bankrate.com's Safe & Sound Ratings provide a star rating system to evaluate the current financial status of financial institutions. The information gathered about banks, credit unions and thrifts is updated as set forth in the Terms of Use of Safe & Sound Ratings and Reports. The Safe & Sound Ratings information is grouped by categories of banks, thrifts and credit unions.

Scoring methodology

Bankrate.com evaluates the financial condition of institutions and assigns a one- to five-star rating for each with five stars representing the highest rating. Institutions with satisfactory performance will generally receive a rating of three or more stars. The majority of institutions fall into the three- to four-star range. An institution with an "NR" rating may be too new to rate or may have limited the publicly available information in their regulatory filings. The "NR" is not an indication of financial strength or weakness. The Safe & Sound rating is believed to be reliable, but the information is not guaranteed. In addition, events since the information was collected may have altered the institution's financial condition.