Safe and Sound

Breda Savings Bank

Breda, IA
5
Star Rating
Breda Savings Bank is a Breda, IA-based, FDIC-insured bank that opened its doors in 1890. Regulatory filings show the bank having equity of $6.7 million on assets of $57.8 million, as of December 31, 2017.

Thanks to the work of 7 full-time employees, the bank has amassed loans and leases worth $29.9 million, including $17.7 million worth of real estate loans. The bank currently holds $35.9 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, Breda Savings 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 important criteria Bankrate used to score U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

Capital works as a cushion against losses and as protection for account holders when a bank is struggling financially. It follows then that when it comes to measuring an an institution's financial strength, capital is key. When it comes to safety and soundness, the higher the capital, the better.

On our test to measure the adequacy of a bank's capital, Breda Savings Bank racked up 14 out of a possible 30 points, beating out the national average of 13.13.

One commonly used measure of this buffer is a bank's Tier 1 capital ratio. Breda Savings Bank's Tier 1 capital ratio was 18.81 percent, higher than the 6 percent level regulators consider adequate, but under the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to financial headwinds.

Overall, Breda Savings Bank held equity amounting to 11.53 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to estimate the effect of problem assets, such as past-due mortgages, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

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

Breda Savings Bank exceeded the national average of 37.49 on Bankrate's test of asset quality, racking up 40 out of a possible 40 points .

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 Breda Savings 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 1.01 percent.

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

Earnings score

How profitable a bank is affects its safety and soundness. Earnings may be retained by the bank, expanding its capital cushion, or be used to address problematic loans, potentially making the bank more resilient in tough times. Obviously, banks that are losing money are less able to do those things.

On Bankrate's test of earnings, Breda Savings Bank scored 22 out of a possible 30, beating out the national average of 15.12.

Return on equity, calculated by dividing net income (essentially, profit) by the total amount of equity, is one widely used measure of a bank's earnings. Breda Savings Bank's most recent annualized quarterly return on equity was 12.20 percent, above the national average of 8.10 percent.

The bank recorded net income of $853,000 on total equity of $6.7 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 1.49 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.