Safe and Sound

Town Bank

Hartland, WI
4
Star Rating
Town Bank is a Hartland, WI-based, FDIC-insured bank started in 1998. As of December 31, 2017, the bank held equity of $250.6 million on $1.91 billion in assets.

U.S. bank customers have $1.65 billion on deposit at 20 offices in WI run by 203 full-time employees. With that footprint, the bank has amassed loans and leases worth $1.51 billion, including real estate loans of $712.5 million.

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

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

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

Town Bank received a score of 10 out of a possible 30 points on our test to measure the adequacy of a bank's capital, less than the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Town Bank's Tier 1 capital ratio was 10.88 percent, above the 6 percent level considered adequate by regulators, but below the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather economic downturns.

Overall, Town Bank held equity amounting to 13.10 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test is intended to try to understand how the bank's loan loss reserves and overall capitalization could be affected by troubled assets, such as unpaid loans.

A bank with a large number of these kinds of assets may eventually be required to use capital to absorb losses, reducing its buffer of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning interest for the bank, reducing earnings and elevating the chances of a future failure.

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

A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.34 percent of Town Bank's loans were noncurrent, meaning 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 maintain a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . Comparing the reserve's size to the total amount of at-risk loans can be a widely used indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Town Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability affects its safety and soundness. Earnings can be retained by the bank, increasing its capital cushion, or be used to address problematic loans, potentially making the bank more resilient in times of trouble. Conversely, losses reduce a bank's ability to do those things.

Town Bank did below-average on Bankrate's test of earnings, achieving a score of 14 out of a possible 30.

Return on equity, calculated by dividing net income (profit, basically) by total equity, is one important measure of a bank's earnings. Town Bank's most recent annualized quarterly return on equity was 6.63 percent, below the national average of 8.10 percent.

The bank reported net income of $16.5 million on total equity of $250.6 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 0.86 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.