Safe and Sound

Applied Bank

Wilmington, DE
5
Star Rating
Founded in 1996, Applied Bank is an FDIC-insured bank headquartered in Wilmington, DE. Regulatory filings show the bank having equity of $40.2 million on assets of $262.0 million, as of December 31, 2017.

With 30 full-time employees in 2 offices in DE, the bank holds loans and leases worth $63.0 million, including real estate loans of $63.0 million. U.S. bank customers currently have $221.2 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Applied Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a look at how the bank did on the three major criteria Bankrate used to evaluate U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a bulwark against losses and affords protection for account holders when a bank is experiencing financial trouble. Therefore, a bank's level of capital is a useful measurement of an institution's financial strength. When it comes to safety and soundness, more capital is better.

Applied Bank achieved a score of 22 out of a possible 30 points on our test to measure capital adequacy, beating out the national average of 13.13.

One commonly used measure of this buffer is a bank's Tier 1 capital ratio. Applied Bank's Tier 1 capital ratio was 56.91 percent, higher than the 6 percent level considered adequate by regulators, and higher than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to financial headwinds.

Overall, Applied Bank held equity amounting to 15.33 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

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

Having lots of these kinds of assets could eventually require a bank to use capital to absorb losses, decreasing its equity buffer. 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 reduced earnings and potentially more risk of a future failure.

Applied Bank scored 40 out of a possible 40 points on Bankrate's test of asset quality, exceeding the national average of 37.49.

The percentage of problem assets a bank holds compared to its total assets is a useful indicator of asset quality.As of December 31, 2017, 2.66 percent of Applied 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 1.01 percent.

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

Earnings score

A bank's earnings performance has an effect on its safety and soundness. Earnings may be retained by the bank, increasing its capital buffer, or be used to address problematic loans, likely making the bank better able to withstand financial shocks. Losses, on the other hand, reduce a bank's ability to do those things.

Applied Bank exceeded 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 (essentially, profit) 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 Applied Bank was 9.10 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $3.8 million on total equity of $40.2 million. The bank experienced an annualized return on average assets, or ROA, of 1.74 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above 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.