Safe and Sound

Chippewa Valley Bank

Winter, WI
4
Star Rating
Chippewa Valley Bank is an FDIC-insured bank founded in 1917 and currently based in Hayward, WI. Regulatory filings show the bank having equity of $34.1 million on assets of $366.9 million, as of December 31, 2017.

Thanks to the efforts of 86 full-time employees in 16 offices in WI, the bank has amassed loans and leases worth $290.9 million, $193.7 million of which are for real estate. The bank currently holds $304.6 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, Chippewa Valley Bank exhibited a good condition, earning 4 out of 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.

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. It follows then that a bank's level of capital is an important measurement of an institution's financial strength. When looking at safety and soundness, the more capital, the better.

Chippewa Valley Bank received a score of 8 out of a possible 30 points on our test to measure the adequacy of a bank's capital, coming in below the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Chippewa Valley Bank's Tier 1 capital ratio was 11.94 percent, above the 6 percent level considered adequate by regulators, 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 headwinds.

Overall, Chippewa Valley Bank held equity amounting to 9.30 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to try to understand how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by problem assets, such as unpaid loans.

Having a large number of these types of assets may eventually require a bank to use capital to absorb losses, cutting down on its equity buffer. 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 chances of a future failure.

Chippewa Valley Bank came in below the national average of 37.49 on Bankrate's test of asset quality, racking up 32 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, 1.63 percent of Chippewa Valley 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 maintain a reserve known as an "allowance for loan and lease losses" to deal with problem assets . The size of that reserve can be a handy indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on Chippewa Valley Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its safety and soundness. Earnings can be retained by the bank, increasing its capital cushion, or be used to deal with problematic loans, likely making the bank better prepared to withstand economic trouble. However, banks that are losing money have less ability to do those things.

Chippewa Valley Bank scored 24 out of a possible 30 on Bankrate's test of earnings, beating out the national average of 15.12.

One key way to measure a bank's earnings is return on equity, or net income (profit, basically) divided by total equity. Chippewa Valley Bank's most recent annualized quarterly return on equity was 14.25 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $4.8 million on total equity of $34.1 million. The bank experienced an annualized return on average assets, or ROA, of 1.34 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.