Safe and Sound

The Bank of Brodhead

Brodhead, WI
5
Star Rating
The Bank of Brodhead is an FDIC-insured bank started in 1896 and currently headquartered in Brodhead, WI. The bank has equity of $21.9 million on assets of $151.1 million, according to December 31, 2017, regulatory filings.

Thanks to the work of 34 full-time employees, the bank has amassed loans and leases worth $84.0 million, including real estate loans of $64.4 million. The bank currently holds $122.3 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, The Bank of Brodhead 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 major criteria Bankrate used to score U.S. banks on safety and soundness.

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SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital is a useful measurement of an institution's financial resilience. It acts as a bulwark against losses and provides protection for depositors when a bank is struggling financially. From a safety and soundness perspective, the higher the capital, the better.

The Bank of Brodhead beat out the national average of 13.13 points on our test to measure the adequacy of a bank's capital, achieving a score of 20 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. The Bank of Brodhead's Tier 1 capital ratio was 22.71 percent, above the 6 percent level regulators consider adequate, but lower than 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, The Bank of Brodhead held equity amounting to 14.47 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to estimate the impact of problem assets, such as unpaid loans, on the bank's loan loss reserves and overall capitalization.

A bank with extensive holdings of these types of assets could eventually be forced to use capital to absorb losses, shrinking 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, diminishing earnings and increasing the chances of a failure in the future.

The Bank of Brodhead beat out the national average of 37.49 on Bankrate's asset quality test, racking up 40 out of a possible 40 points .

A handy indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.10 percent of The Bank of Brodhead'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 problem assets known as an "allowance for loan and lease losses." That reserve's size can be a handy indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of at-risk loans. The Bank of Brodhead's loan loss allowance was 1,311.36 percent of its total noncurrent loans, above the national average. All else being equal, the higher the ratio of loan loss allowance to noncurrent loans, the better.

Earnings score

A bank's ability to earn money has an effect on its long-term survivability. A bank can retain its earnings, increasing its capital cushion, or put them to work addressing problematic loans, likely making the bank better prepared to withstand financial trouble. Obviously, banks that are losing money are less able to do those things.

The Bank of Brodhead scored 14 out of a possible 30 on Bankrate's earnings test, lower than the national average of 15.12.

Return on equity, calculated by dividing net income (profit, basically) by total equity, is one widely used measure of a bank's earnings. The most recent annualized quarterly return on equity for The Bank of Brodhead was 6.16 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $1.3 million on total equity of $21.9 million. The bank reported an annualized return on average assets, or ROA, of 0.91 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.