Safe and Sound

Independence Bank

Independence, OH
4
Star Rating
Independence Bank is an FDIC-insured bank founded in 1979 and currently headquartered in Independence, OH. Regulatory filings show the bank having equity of $22.6 million on $196.4 million in assets, as of December 31, 2017.

Thanks to the efforts of 23 full-time employees, the bank has amassed loans and leases worth $107.4 million, including $69.4 million worth of real estate loans. U.S. bank customers currently have $173.7 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Independence Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a breakdown of how the bank fared on the three important criteria Bankrate used to grade U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a cushion against losses and provides 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 essential. When looking at safety and soundness, the more capital, the better.

On our test to measure the adequacy of a bank's capital, Independence Bank scored 14 out of a possible 30 points, exceeding the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Independence Bank's Tier 1 capital ratio was 46.34 percent, higher than the 6 percent level considered adequate by regulators, and exceeding the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to economic difficulties.

Overall, Independence Bank held equity amounting to 11.49 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to determine the effect of problem assets, such as unpaid mortgages, on the bank's loan loss reserves and overall capitalization.

A bank with extensive holdings of these kinds of assets may eventually be forced to use capital to cover losses, shrinking its cushion of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning interest for the bank, decreasing earnings and elevating the chances of a future failure.

Independence Bank scored 40 out of a possible 40 points on Bankrate's asset quality test, above the national average of 37.49.

A helpful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 1.02 percent of Independence Bank's loans were noncurrent, meaning 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 to deal with troubled assets known as an "allowance for loan and lease losses." Comparing the reserve's size to the total amount of at-risk loans can be a handy indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Independence Bank'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, giving a boost to its capital cushion, or use them to deal with problematic loans, potentially making the bank better able to withstand economic shocks. Banks that are losing money, however, have less ability to do those things.

Independence Bank fell short of the national average on Bankrate's earnings test, achieving a score of 10 out of a possible 30.

One widely used measure of a bank's earnings is return on equity, or net income (profit, basically) divided by total equity. The most recent annualized quarterly return on equity for Independence Bank was 4.63 percent, below the national average of 8.10 percent.

The bank reported net income of $1.0 million on total equity of $22.6 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 0.53 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below 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.