Safe and Sound

Exchange Bank

Gibbon, NE
5
Star Rating
Exchange Bank is a Gibbon, NE-based, FDIC-insured bank dating back to 1930. The bank has equity of $88.6 million on assets of $876.0 million, according to December 31, 2017, regulatory filings.

With 113 full-time employees in 7 offices in multiple states, the bank has amassed loans and leases worth $598.3 million, including real estate loans of $472.5 million. U.S. bank customers currently have $597.2 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Exchange Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a breakdown of how the bank did on the three important criteria Bankrate used to evaluate American banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a bulwark 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 fortitude, capital is important. When it comes to safety and soundness, more capital is better.

Exchange Bank received a score of 10 out of a possible 30 points on our test to measure capital adequacy, below the national average of 13.13.

One commonly used measure of this buffer is a bank's Tier 1 capital ratio. Exchange Bank's Tier 1 capital ratio was 12.84 percent, above the 6 percent level considered adequate by regulators, but under the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to economic challenges.

Overall, Exchange Bank held equity amounting to 10.11 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test is intended to try to understand how the bank's loan loss reserves and overall capitalization could be affected by problem assets, such as past-due mortgages.

A bank with a large number of these kinds of assets may eventually be forced to use capital to absorb losses, decreasing its cushion of equity. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning interest for the bank, resulting in reduced earnings and potentially more risk of a future failure.

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

The percentage of problem assets a bank holds compared to its total assets is a handy indicator of asset quality.As of December 31, 2017, 0.61 percent of Exchange 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 useful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on Exchange Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money has an effect on its safety and soundness. A bank can retain its earnings, boosting its capital cushion, or put them to work addressing problematic loans, potentially making the bank more resilient in tough times. Conversely, losses take away from a bank's ability to do those things.

On Bankrate's test of earnings, Exchange Bank scored 26 out of a possible 30, better than the national average of 15.12.

Return on equity, calculated by dividing net income (essentially, profit) by total equity, is one widely used measure of a bank's earnings. Exchange Bank's most recent annualized quarterly return on equity was 17.57 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $15.0 million on total equity of $88.6 million. The bank had an annualized return on average assets, or ROA, of 1.79 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.