Safe and Sound

AbbyBank

Abbotsford, WI
4
Star Rating
Abbotsford, WI-based AbbyBank is an FDIC-insured bank founded in 1968. The bank has equity of $41.3 million on $464.5 million in assets, according to December 31, 2017, regulatory filings.

U.S. bank customers have $402.7 million on deposit at 6 offices in WI run by 105 full-time employees. With that footprint, the bank holds loans and leases worth $357.9 million, $310.4 million of which are for real estate.

Overall, Bankrate believes that, as of December 31, 2017, AbbyBank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a look at how the bank fared on the three key criteria Bankrate used to score U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a cushion against losses and affords protection for account holders when a bank is struggling financially. It follows then that when it comes to measuring an an institution's financial fortitude, capital is essential. From a safety and soundness perspective, the higher the capital, the better.

AbbyBank came in below the national average of 13.13 on our test to measure capital adequacy, receiving a score of 8 out of a possible 30 points.

A bank's Tier 1 capital ratio is an essential measure of this buffer. AbbyBank's Tier 1 capital ratio was 10.79 percent, exceeding the 6 percent level considered adequate by regulators, but under the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather economic challenges.

Overall, AbbyBank held equity amounting to 8.90 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to estimate the effect of troubled assets, such as past-due mortgages, on the bank's capitalization and allocated loan loss reserves.

Having large numbers of these kinds of assets may eventually require a bank 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 money, pushing down earnings and elevating the risk of a future failure.

On Bankrate's test of asset quality, AbbyBank scored 36 out of a possible 40 points, failing to reach the national average of 37.49 points.

A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 1.02 percent of AbbyBank's loans were noncurrent, meaning they were more than 90 days past due or were in non-accrual status. That's above the national average of 1.01 percent.

Banks keep a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . How large that reserve is can be a useful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on AbbyBank's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability affects its long-term survivability. Earnings may be retained by the bank, giving a boost to its capital cushion, or be used to address problematic loans, likely making the bank better prepared to withstand financial shocks. Conversely, losses reduce a bank's ability to do those things.

AbbyBank beat the national average on Bankrate's test of earnings, achieving a score of 18 out of a possible 30.

Return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for AbbyBank was 8.46 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $3.4 million on total equity of $41.3 million. The bank reported an annualized return on average assets, or ROA, of 0.76 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below the average for U.S. banks of 1.00 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.