Safe and Sound

Exchange Bank of Northeast Missouri

Kahoka, MO
5
Star Rating
Started in 1903, Exchange Bank of Northeast Missouri is an FDIC-insured bank headquartered in Kahoka, MO. Regulatory filings show the bank having equity of $17.9 million on assets of $146.1 million, as of December 31, 2017.

Thanks to the work of 44 full-time employees in 6 offices in MO, the bank has amassed loans and leases worth $98.4 million, including $74.5 million worth of real estate loans. The bank currently holds $123.9 million in deposits from U.S. customers.

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

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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 economic instability. Therefore, a bank's level of capital is a valuable measurement of an institution's financial resilience. When looking at safety and soundness, the higher the capital, the better.

Exchange Bank of Northeast Missouri scored below the national average of 13.13 on our test to measure capital adequacy, scoring 12 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Exchange Bank of Northeast Missouri's Tier 1 capital ratio was 13.43 percent, above the 6 percent level considered adequate by regulators, but under the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to economic downturns.

Overall, Exchange Bank of Northeast Missouri held equity amounting to 12.26 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 loans, on the bank's loan loss reserves and overall capitalization.

A bank with a large number of these kinds of assets may eventually be forced to use capital to cover losses, decreasing its buffer of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning interest for the bank, diminishing earnings and increasing the risk of a future failure.

On Bankrate's test of asset quality, Exchange Bank of Northeast Missouri scored 40 out of a possible 40 points, beating the national average of 37.49 points.

A handy indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.70 percent of Exchange Bank of Northeast Missouri'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 keep a reserve to handle problem 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 useful indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Exchange Bank of Northeast Missouri's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its safety and soundness. A bank can retain its earnings, boosting its capital buffer, or use them to deal with problematic loans, potentially making the bank more resilient in times of trouble. However, banks that are losing money are less able to do those things.

Exchange Bank of Northeast Missouri scored 20 out of a possible 30 on Bankrate's test of earnings, beating out the national average of 15.12.

Return on equity, calculated by dividing net income (essentially, profit) by total equity, is one important way to measure a bank's earnings. Exchange Bank of Northeast Missouri's most recent annualized quarterly return on equity was 10.93 percent, above the national average of 8.10 percent.

The bank recorded net income of $1.9 million on total equity of $17.9 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 1.29 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.