Safe and Sound

Industrial Bank

Washington, DC
2
Star Rating
Founded in 1934, Industrial Bank is an FDIC-insured bank based in Washington, DC. The bank holds equity of $35.1 million on $423.2 million in assets, according to December 31, 2017, regulatory filings.

U.S. bank customers have $335.0 million on deposit at 8 offices in multiple states run by 110 full-time employees. With that footprint, the bank holds loans and leases worth $308.1 million, $277.8 million of which are for real estate.

Overall, Bankrate believes that, as of December 31, 2017, Industrial Bank exhibited a below-average condition, earning 2 out of 5 stars for safety and soundness. Keep reading for a look at how the bank fared on the three major criteria Bankrate used to grade U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a buffer against losses and affords protection for account holders when a bank is struggling financially. Therefore, a bank's level of capital is a valuable measurement of an institution's financial strength. From a safety and soundness perspective, more capital is preferred.

Industrial Bank received a score of 8 out of a possible 30 points on our test to measure capital adequacy, below the national average of 13.13.

One essential measure of this buffer is a bank's Tier 1 capital ratio. Industrial Bank's Tier 1 capital ratio was 11.08 percent, higher than the 6 percent level considered adequate by regulators, but under the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather economic challenges.

Overall, Industrial Bank held equity amounting to 8.28 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to estimate the impact of problem assets, such as unpaid mortgages, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

Having extensive holdings of these kinds of assets may eventually force a bank to use capital to absorb losses, diminishing its equity buffer. 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, diminishing earnings and elevating the risk of a failure in the future.

On Bankrate's test of asset quality, Industrial Bank scored 20 out of a possible 40 points, less than the national average of 37.49 points.

The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of December 31, 2017, 4.99 percent of Industrial Bank's loans were noncurrent -- in other words, 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 keep a reserve to deal with troubled assets known as an "allowance for loan and lease losses." The size of that reserve can be a helpful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on Industrial Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its long-term survivability. A bank can retain its earnings, expanding its capital buffer, or put them to work addressing problematic loans, likely making the bank better prepared to withstand economic shocks. However, banks that are losing money have less ability to do those things.

Industrial Bank received below-average marks on Bankrate's earnings test, achieving a score of 4 out of a possible 30.

One key measure of a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by the total amount of equity. Industrial Bank's most recent annualized quarterly return on equity was 1.88 percent, below the national average of 8.10 percent.

The bank recorded net income of $667,000 on total equity of $35.1 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 0.17 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.