Safe and Sound

Town Bank

Hartland, WI
4
Star Rating
Hartland, WI-based Town Bank is an FDIC-insured bank founded in 1998. The bank has equity of $251.8 million on $1,890,876,000 in assets, according to June 30, 2017, regulatory filings.

U.S. bank customers have $1.62 billion on deposit at 19 offices in WI run by 212 full-time employees. With that footprint, the bank currently holds loans and leases worth $1.49 billion, including $712.3 million worth of real estate loans.

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

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial resilience, capital is key. It acts as a cushion against losses and as protection for depositors when a bank is struggling financially. From a safety and soundness perspective, the higher the capital, the better.
Town Bank received a score of 10 out of a possible 30 points on our test to measure capital adequacy, less than the national average of 13.38.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Town Bank's Tier 1 capital ratio was 11.08 percent, above the 6 percent level regulators consider adequate, but below the national average of 25.16 percent. A higher capital ratio suggests the bank will be better able to stand up to economic headwinds.

Overall, Town Bank held equity amounting to 13.32 percent of its assets, which exceeded the national average of 12.10 percent.

Asset Quality Score

This test is intended to estimate how the bank's capitalization and allocated loan loss reserves could be affected by troubled assets, such as unpaid loans.

A bank with a large number of these types of assets may eventually have to use capital to absorb losses, diminishing its equity cushion. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning money, reducing earnings and increasing the chances of a future failure.

On Bankrate's test of asset quality, Town Bank scored 40 out of a possible 40 points, beating the national average of 37.62 points.

A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of June 30, 2017, 0.30 percent of Town Bank's loans were noncurrent, meaning they were more than 90 days past due or were in non-accrual status. That's below the national average of 1.04 percent.

Banks maintain a reserve to deal with troubled assets known as an "allowance for loan and lease losses." The size of that reserve can be a helpful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on Town Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its long-term survivability. Earnings may be retained by the bank, boosting its capital buffer, or be used to deal with problematic loans, potentially making the bank better prepared to withstand financial shocks. However, banks that are losing money are less able to do those things.

Town Bank received below-average marks on Bankrate's test of earnings, achieving a score of 14 out of a possible 30.

One key measure of a bank's earnings is return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity. Town Bank's most recent annualized quarterly return on equity was 7.08 percent, below the national average of 9.28 percent.

The bank reported net income of $8.7 million on total equity of $251.8 million for the twelve months ended June 30, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.91 percent, below the 1 percent deemed satisfactory in accordance with industry standards and 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.