Safe and Sound

National Exchange Bank and Trust

Fond Du Lac, WI
5
Star Rating
National Exchange Bank and Trust is a Fond Du Lac, WI-based, FDIC-insured bank started in 1933. As of December 31, 2017, the bank held equity of $354.1 million on $1.90 billion in assets.

Thanks to the efforts of 324 full-time employees in 35 offices in WI, the bank holds loans and leases worth $1.11 billion, including real estate loans of $790.2 million. The bank currently holds $1.48 billion in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, National Exchange Bank and Trust exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a breakdown of how the bank fared 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 acts as a cushion against losses and provides protection for account holders during times of financial trouble for the bank. It follows then that a bank's level of capital is an essential measurement of a bank's financial fortitude. When looking at safety and soundness, the more capital, the better.

National Exchange Bank and Trust did better than the national average of 13.13 points on our test to measure capital adequacy, achieving a score of 28 out of a possible 30 points.

One essential measure of this buffer is a bank's Tier 1 capital ratio. National Exchange Bank and Trust's Tier 1 capital ratio was 22.94 percent, exceeding 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 financial downturns.

Overall, National Exchange Bank and Trust held equity amounting to 18.66 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test is intended to estimate how the bank's capitalization and allocated loan loss reserves could be affected by problem assets, such as past-due loans.

A bank with extensive holdings of these kinds of assets may eventually be forced to use capital to cover losses, reducing 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 money, resulting in diminished earnings and potentially more risk of a failure in the future.

On Bankrate's test of asset quality, National Exchange Bank and Trust scored 40 out of a possible 40 points, better 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, 0.32 percent of National Exchange Bank and Trust'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 to deal with troubled assets known as an "allowance for loan and lease losses." How large that reserve is can be a handy indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on National Exchange Bank and Trust's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money affects its long-term survivability. Earnings can be retained by the bank, expanding its capital buffer, or be used to deal with problematic loans, likely making the bank better prepared to withstand economic trouble. Obviously, banks that are losing money are less able to do those things.

On Bankrate's earnings test, National Exchange Bank and Trust scored 12 out of a possible 30, failing to reach the national average of 15.12.

Return on equity, calculated by dividing net income (profit, essentially) by total equity, is one important way to measure a bank's earnings. National Exchange Bank and Trust's most recent annualized quarterly return on equity was 5.98 percent, below the national average of 8.10 percent.

The bank recorded net income of $20.9 million on total equity of $354.1 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 1.09 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.