Safe and Sound

Intercity State Bank

Schofield, WI
5
Star Rating
Schofield, WI-based Intercity State Bank is an FDIC-insured bank founded in 1952. The bank has equity of $36.1 million on $176.4 million in assets, according to December 31, 2017, regulatory filings.

Thanks to the efforts of 32 full-time employees in 3 offices in WI, the bank has amassed loans and leases worth $134.3 million, including real estate loans of $116.7 million. The bank currently holds $139.4 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, Intercity 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 key criteria Bankrate used to score U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a bulwark against losses and provides protection for depositors when a bank is struggling financially. It follows then that when it comes to measuring an a bank's financial strength, capital is useful. When looking at safety and soundness, the more capital, the better.

Intercity State Bank did better than the national average of 13.13 points on our test to measure the adequacy of a bank's capital, receiving a score of 30 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Intercity State Bank's Tier 1 capital ratio was 25.85 percent, exceeding the 6 percent level considered adequate by regulators, and exceeding the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to financial downturns.

Overall, Intercity State Bank held equity amounting to 20.48 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to try to understand how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by troubled assets, such as unpaid loans.

A bank with large numbers of these types of assets could eventually be required 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 money, diminishing earnings and elevating the chances of a future failure.

Intercity State Bank fell short of the national average of 37.49 on Bankrate's test of asset quality, racking up 36 out of a possible 40 points .

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, 1.71 percent of Intercity State 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 keep a reserve to deal with problem assets known as an "allowance for loan and lease losses." Comparing how large that reserve is to the total amount of problem loans can be a widely used indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Intercity State Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its safety and soundness. Earnings may be retained by the bank, giving a boost to its capital cushion, or be used to address problematic loans, potentially making the bank better prepared to withstand economic trouble. However, banks that are losing money have less ability to do those things.

On Bankrate's test of earnings, Intercity State Bank scored 12 out of a possible 30, below the national average of 15.12.

Return on equity, calculated by dividing net income (profit, basically) by total equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for Intercity State Bank was 5.95 percent, below the national average of 8.10 percent.

The bank recorded net income of $2.1 million on total equity of $36.1 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 1.24 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.