Safe and Sound

Malvern Bank

Malvern, IA
4
Star Rating
Malvern Bank is a Malvern, IA-based, FDIC-insured bank dating back to 1892. As of December 31, 2017, the bank had equity of $12.7 million on assets of $146.5 million.

With 18 full-time employees, the bank currently holds loans and leases worth $115.8 million, including real estate loans of $42.3 million. U.S. bank customers currently have $133.5 million in deposits with the bank.

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

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THE INSTITUTION'S SCORE

Capital Score

Capital is an important measurement of an institution's financial resilience. It acts as a buffer against losses and provides protection for accountholders during periods of financial instability for the bank. When looking at safety and soundness, the more capital, the better.

Malvern Bank finished below the national average of 13.13 on our test to measure capital adequacy, racking up 8 out of a possible 30 points.

One commonly used measure of this buffer is a bank's Tier 1 capital ratio. Malvern Bank's Tier 1 capital ratio was 10.94 percent, higher than the 6 percent level regulators consider adequate, but under the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather financial headwinds.

Overall, Malvern Bank held equity amounting to 8.65 percent of its assets, which was lower than 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 problem assets, such as past-due mortgages.

A bank with lots of these types of assets could eventually be required to use capital to absorb losses, shrinking its cushion of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, reducing earnings and elevating the risk of a failure in the future.

On Bankrate's test of asset quality, Malvern Bank scored 36 out of a possible 40 points, lower than the national average of 37.49 points.

The percentage of problem assets a bank holds compared to its total assets is a widely used indicator of asset quality.As of December 31, 2017, 0.92 percent of Malvern 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 1.01 percent.

Banks keep a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . That reserve's size can be a useful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on Malvern 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 use them to address problematic loans, likely making the bank more resilient in tough times. Losses, on the other hand, take away from a bank's ability to do those things.

Malvern Bank did above-average on Bankrate's test of earnings, achieving a score of 16 out of a possible 30.

Return on equity, calculated by dividing net income (profit, basically) by the total amount of equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for Malvern Bank was 7.04 percent, below the national average of 8.10 percent.

The bank earned net income of $894,000 on total equity of $12.7 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 0.61 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.