Safe and Sound

IAB Financial Bank

Fort Wayne, IN
4
Star Rating
Founded in 1946, IAB Financial Bank is an FDIC-insured bank headquartered in Fort Wayne, IN. As of June 30, 2017, the bank had equity of $133.0 million on assets of $1.09 billion.

With 231 full-time employees in 19 offices in IN, the bank has amassed loans and leases worth $743.6 million, including real estate loans of $570.5 million. U.S. bank customers currently have $865.6 million in deposits with the bank.

Overall, Bankrate believes that, as of June 30, 2017, IAB Financial Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for an analysis of how the bank faired on the three important criteria Bankrate used to grade American banks.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

Capital acts as a buffer against losses and affords protection for accountholders when a bank is struggling financially. It follows then that a bank's level of capital is a useful measurement of an institution's financial strength. When it comes to safety and soundness, the higher the capital, the better.
IAB Financial Bank received a score of 12 out of a possible 30 points on our test to measure capital adequacy, less than the national average of 13.38.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. IAB Financial Bank's Tier 1 capital ratio was 13.95 percent, exceeding the 6 percent level regulators consider adequate, but below the national average of 25.16 percent. The higher the capital ratio, the better the bank will be able to stand up to economic challenges.

Overall, IAB Financial Bank held equity amounting to 12.22 percent of its assets, which exceeded the national average of 12.10 percent.

Asset Quality Score

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

A bank with extensive holdings of these types of assets could eventually have to use capital to absorb losses, shrinking its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and no longer earning interest for the bank, resulting in diminished earnings and potentially more risk of a failure in the future.

IAB Financial Bank beat out the national average of 37.62 on Bankrate's asset quality test, racking up 40 out of a possible 40 points .

The percentage of problem assets a bank holds compared to its total assets is a useful indicator of asset quality.As of June 30, 2017, 0.64 percent of IAB Financial Bank'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 1.04 percent.

Banks keep a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . Comparing the the size of that reserve to the total amount of at-risk loans can be a helpful indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on IAB Financial Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance affects its safety and soundness. A bank can retain its earnings, increasing its capital buffer, or put them to work addressing problematic loans, potentially making the bank more resilient in times of trouble. Banks that are losing money, however, have less ability to do those things.

On Bankrate's test of earnings, IAB Financial Bank scored 16 out of a possible 30, less than the national average of 16.52.

One key way to measure a bank's earnings is return on equity, calculated by dividing net income (profit, basically) by total equity. IAB Financial Bank's most recent annualized quarterly return on equity was 7.84 percent, below the national average of 9.28 percent.

The bank recorded net income of $5.1 million on total equity of $133.0 million for the twelve months ended June 30, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.94 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below the average for U.S. banks of 1.14 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.