Safe and Sound

Exchange State Bank

Collins, IA
5
Star Rating
Exchange State Bank is an FDIC-insured bank founded in 1902 and currently based in Collins, IA. Regulatory filings show the bank having equity of $10.7 million on assets of $109.5 million, as of December 31, 2017.

U.S. bank customers have $84.6 million on deposit at 3 offices in IA run by 20 full-time employees. With that footprint, the bank holds loans and leases worth $93.7 million, including real estate loans of $56.3 million.

Overall, Bankrate believes that, as of December 31, 2017, Exchange State 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.

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THE INSTITUTION'S SCORE

Capital Score

Capital is an important measurement of a bank's financial resilience. It works as a bulwark against losses and provides protection for depositors during times of financial trouble for the bank. When looking at safety and soundness, more capital is preferred.

On our test to measure the adequacy of a bank's capital, Exchange State Bank received a score of 10 out of a possible 30 points, lower than the national average of 13.13.

One commonly used measure of this buffer is a bank's Tier 1 capital ratio. Exchange State Bank's Tier 1 capital ratio was 12.23 percent, exceeding the 6 percent level considered adequate by regulators, but less than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather financial difficulties.

Overall, Exchange State Bank held equity amounting to 9.80 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 unpaid mortgages.

Having large numbers of these kinds of assets suggests a bank could have to use capital to cover losses, decreasing its equity cushion. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, resulting in lower earnings and potentially more risk of a failure in the future.

Exchange State Bank scored 40 out of a possible 40 points on Bankrate's asset quality test, better than the national average of 37.49.

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, none of Exchange State 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 maintain a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . Comparing the size of that reserve to the total amount of problematic loans can be a helpful indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Exchange State Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its long-term survivability. Earnings can be retained by the bank, giving a boost to its capital buffer, or be used to deal with problematic loans, potentially making the bank better prepared to withstand financial trouble. However, banks that are losing money have less ability to do those things.

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

Return on equity, calculated by dividing net income (profit, essentially) by total equity, is one important measure of a bank's earnings. The most recent annualized quarterly return on equity for Exchange State Bank was 11.43 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $1.2 million on total equity of $10.7 million. The bank reported an annualized return on average assets, or ROA, of 1.12 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.