Safe and Sound

Advantage Community Bank

Dorchester, WI
5
Star Rating
Advantage Community Bank is a Dorchester, WI-based, FDIC-insured bank dating back to 1906. The bank has equity of $17.2 million on assets of $146.6 million, according to December 31, 2017, regulatory filings.

With 31 full-time employees in 4 offices in WI, the bank currently holds loans and leases worth $97.8 million, including real estate loans of $73.5 million. U.S. bank customers currently have $127.0 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Advantage Community Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a breakdown of how the bank fared on the three key criteria Bankrate used to evaluate U.S. banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a buffer against losses and provides protection for account holders during times of economic trouble for the bank. Therefore, when it comes to measuring an a bank's financial strength, capital is key. From a safety and soundness perspective, the higher the capital, the better.

Advantage Community Bank achieved a score of 14 out of a possible 30 points on our test to measure the adequacy of a bank's capital, above the national average of 13.13.

A bank's Tier 1 capital ratio is an essential measure of this buffer. Advantage Community Bank's Tier 1 capital ratio was 15.57 percent, exceeding the 6 percent level considered adequate by regulators, but below the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to financial challenges.

Overall, Advantage Community Bank held equity amounting to 11.71 percent of its assets, which was lower than the national average of 12.03 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 large numbers of these kinds of assets may eventually have to use capital to cover losses, cutting down on its equity cushion. Many of those assets are also likely to be in non-accrual status and no longer earning money, pushing down earnings and increasing the risk of a failure in the future.

Advantage Community Bank scored 40 out of a possible 40 points on Bankrate's asset quality test, better than the national average of 37.49.

The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of December 31, 2017, none of Advantage Community Bank's loans were noncurrent -- in other words, they were more than 90 days past due or were in non-accrual status. That's below the national average of 1.01 percent.

Banks maintain a reserve to handle troubled assets known as an "allowance for loan and lease losses." Comparing 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 troubled assets. Unfortunately, the FDIC did not provide information on Advantage Community 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, boosting its capital cushion, or put them to work addressing problematic loans, likely making the bank more resilient in times of trouble. Obviously, banks that are losing money are less able to do those things.

Advantage Community Bank beat the national average on Bankrate's test of earnings, achieving a score of 16 out of a possible 30.

Return on equity, calculated by dividing net income (profit, essentially) by total equity, is one widely used measure of a bank's earnings. Advantage Community Bank's most recent annualized quarterly return on equity was 7.43 percent, below the national average of 8.10 percent.

The bank reported net income of $1.2 million on total equity of $17.2 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 0.88 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.