Safe and Sound

Charter Bank

Eau Claire, WI
5
Star Rating
Eau Claire, WI-based Charter Bank is an FDIC-insured bank founded in 1980. The bank has equity of $108.9 million on $863.4 million in assets, according to December 31, 2017, regulatory filings.

With 88 full-time employees in 3 offices in multiple states, the bank has amassed loans and leases worth $625.4 million, including real estate loans of $489.4 million. U.S. bank customers currently have $705.7 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Charter Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for an analysis of how the bank did on the three key criteria Bankrate used to grade American 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 depositors during periods of financial instability for the bank. Therefore, when it comes to measuring an an institution's financial fortitude, capital is important. When looking at safety and soundness, the higher the capital, the better.

On our test to measure the adequacy of a bank's capital, Charter Bank racked up 16 out of a possible 30 points, beating out the national average of 13.13.

One widely followed measure of this buffer is a bank's Tier 1 capital ratio. Charter Bank's Tier 1 capital ratio was 15.18 percent, above the 6 percent level regulators consider adequate, but under the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to economic downturns.

Overall, Charter Bank held equity amounting to 12.61 percent of its assets, which exceeded 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 problem assets, such as unpaid mortgages.

Having lots of these kinds of assets could eventually force a bank to use capital to absorb losses, reducing its equity cushion. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, reducing earnings and elevating the risk of a failure in the future.

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

A helpful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.26 percent of Charter 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 . The size of that reserve can be a widely used indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on Charter Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance affects its long-term survivability. 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 have less ability to do those things.

Charter Bank did above-average on Bankrate's earnings test, achieving a score of 26 out of a possible 30.

Return on equity, calculated by dividing net income (profit, basically) by the total amount of equity, is one key measure of a bank's earnings. Charter Bank's most recent annualized quarterly return on equity was 16.58 percent, above the national average of 8.10 percent.

The bank earned net income of $18.2 million on total equity of $108.9 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 2.13 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.