Safe and Sound

MetaBank

Storm Lake, IA
4
Star Rating
Founded in 1954, MetaBank is an FDIC-insured bank headquartered in Sioux Falls, SD. The bank holds equity of $523.7 million on $5.41 billion in assets, according to December 31, 2017, regulatory filings.

With 878 full-time employees in 11 offices in multiple states, the bank holds loans and leases worth $1.50 billion, including real estate loans of $962.9 million. U.S. bank customers currently have $3.52 billion in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, MetaBank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for an analysis of how the bank did on the three major criteria Bankrate used to grade American banks.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial strength, capital is useful. It works as a bulwark against losses and as protection for accountholders when a bank is experiencing financial instability. When it comes to safety and soundness, the higher the capital, the better.

On our test to measure capital adequacy, MetaBank received a score of 6 out of a possible 30 points, coming in below the national average of 13.13.

One essential measure of this buffer is a bank's Tier 1 capital ratio. MetaBank's Tier 1 capital ratio was 16.64 percent, higher than the 6 percent level regulators consider adequate, but below the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to economic downturns.

Overall, MetaBank held equity amounting to 9.69 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 impact of problem assets, such as past-due loans, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

A bank with lots of these types of assets could eventually be forced to use capital to cover losses, decreasing its equity buffer. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, reducing earnings and increasing the chances of a future failure.

MetaBank fell below the national average of 37.49 on Bankrate's asset quality test, racking up 36 out of a possible 40 points .

A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 2.20 percent of MetaBank'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 maintain a reserve known as an "allowance for loan and lease losses" to deal with problem assets . Comparing the size of that reserve to the total amount of problem loans can be a helpful indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on MetaBank's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability has an effect on its long-term survivability. Earnings may be retained by the bank, expanding its capital buffer, or be used to deal with problematic loans, likely making the bank more resilient in tough times. Obviously, banks that are losing money have less ability to do those things.

MetaBank scored 18 out of a possible 30 on Bankrate's earnings test, exceeding the national average of 15.12.

Return on equity, calculated by dividing net income (profit, basically) by total equity, is one key measure of a bank's earnings. MetaBank's most recent annualized quarterly return on equity was 10.26 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $51.8 million on total equity of $523.7 million. The bank had an annualized return on average assets, or ROA, of 1.14 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.