Baraboo National Bank

Baraboo National Bank showed the biggest improvement among Madison area banks in the marks issued by two independent ratings services, based on Dec. 31, 2014, figures reported to federal regulators.

How financially sound is your bank?

More south-central Wisconsin banks are getting higher marks and fewer are hugging the bottom in an assessment of their Dec. 31, 2014, financials by independent ratings services.

Only one bank of 73 serving the Madison area — Guaranty Bank, in the Milwaukee area — drew sub-par grades in the latest review by Bankrate.com and Bauer Financial compared with five banks a year ago, and seven banks two years ago, that were graded below average.

“It is very clear that today, Wisconsin banks are very healthy,” said Rose Oswald Poels, president and CEO of Wisconsin Bankers Association, the state’s largest financial industry trade association.

Eight financial institutions earned the highest five-star ratings from both Bankrate.com and Bauer; last year, there were 10.

Six of the eight are full-service consumer banks, primarily from smaller communities. They are: Bank of Brodhead; Bank of Lake Mills; Bank of Prairie du Sac; First National Bank at Darlington; Peoples State Bank, Prairie du Chien; and State Bank of Cazenovia.

Also earning top marks from both ratings services are Bankers Bank, Madison, which serves financial institutions, and John Deere Financial, Madison, a federal savings bank that handles Deere & Co.’s revolving credit lines.

Between the two ratings companies, quite a few area banks inched up or down a notch or two.

Bauer raised the grades for 18 banks and lowered them for three. Bankrate gave 12 banks higher scores, and lowered marks for 11 institutions.

Many were banks that had received five stars last year and dropped to four stars, including Johnson Bank, Racine; Peoples Community Bank, Mazomanie; Clare Bank, Platteville; and Bank of Sun Prairie.

Greg McBride, chief financial analyst for Bankrate, based in North Palm Beach, Florida, cautioned not to read too much into ticks like that.

“It’s like an ‘A’ student who gets a ‘B’ on the report card. It’s not the end of the world,” he said.

The ratings services base their assessments on financial data, most of which is pulled from quarterly reports submitted to the Federal Deposit Insurance Corp. (FDIC), he said.

“A lot of the tests that we do, or benchmarks, are relative to peers among the same asset size. It may not be that the financial institution has deteriorated; it may just be that their peers demonstrated bigger improvement,” McBride said.

Better report cards

AnchorBank is moving up in the charts for the second straight year. The largest Madison-based bank scored three stars each from Bankrate (“performing”) and Bauer (“adequate”). Two years ago, when the bank was still struggling with problem loans from the recession, Anchor drew one star from Bankrate and zero stars from Bauer, the lowest marks from each. In September 2013, emerging from bankruptcy reorganization with an infusion of new capital, Anchor started moving back up in the ratings.

“While normally, we do not follow these rating agencies, we’re pleased that AnchorBank has continued to make steady progress since our recapitalization — including five quarters of consecutive positive earnings, and a healthy, growing business franchise. Now, we continue our work to bring the bank up to speed with an increasingly digital financial services landscape,” Chris Bauer, Anchor president and CEO, said.

Wisconsin River Bank, Sauk City, earned four stars (“sound”) from Bankrate, up from three (“performing”), and five stars (“superior”) from Bauer Financial, up from 3.5 stars (“good”) last year.

But the biggest improvement over last year’s ratings was for Baraboo National Bank. Both ratings services gave Baraboo National three stars, compared to the one star grade they each imposed last year.

The bank, 50 miles northwest of Madison, with roots dating back to 1857, sold four branches in three transactions last year. It ended 2014 with net income of $6.2 million, compared with a net loss of $22.1 million in 2013. Loans at least 90 days overdue made up 4.5 percent of all loans, down from 6.7 percent a year ago, and assets totaled $435.2 million as of Dec. 31, down from $632.2 million, a year earlier.

“Our finances are in good shape,” said chairman and CEO Merlin Zitzner.

He says Baraboo National Bank, with 11 remaining locations and 133 employees, could close more branches.

“We think mobile banking is the way to go so there’s an effort to reduce our exposure in brick-and-mortar and put more emphasis on mobile banking,” Zitzner said. “The 18- to 34-year-olds, they’re not coming into the bank lobbies anymore.”

The single bank serving the Madison area that is still struggling — according to the ratings services — is Guaranty Bank, based in the Milwaukee area but with several locations at local grocery stores. Guaranty drew one star from Bankrate and zero stars from Bauer, as it did a year ago.

Guaranty had net income of $141,000, as of Dec. 31, a drop from $16.5 million in earnings in 2013 after the bank sold its Shelter Mortgage division. More than 13 percent of all loans were at least 90 days overdue, down from 15.3 percent, and its total risk-based capital was 5.2 percent, down from 5.5 percent. Total risk-based capital, which signifies a bank’s reserves, is considered adequate at 8 percent or more, according to the FDIC.

No Wisconsin banks were closed by regulators in 2014.

Ratings cast limited view

Ratings services have their own proprietary ways of judging a bank’s health. For Bankrate.com, there are four main components, chief financial analyst McBride said: Capitalization, asset quality, earnings and liquidity.

Nationwide, banks have continued to improve since the Great Recession, McBride said. “The industry is still in a tough spot with regard to net interest margins but the improving economy has made loan quality much improved,” he said.

“Net interest margins are the difference between what it costs an institution to borrow money and what the institution can earn through the interest it charges consumers for loans and leases. With interest rates so low for so long, net interest margins have been the tightest in recent memory,” McBride said.

“A lot of banks and credit unions alike are champing at the bit, waiting for short-term interest rates to go up, so it breathes a little life into their net interest margins,” he said.

As for the ratings, Oswald Poels, of the Wisconsin Bankers Association, suggests viewing them with a grain of salt.

“I think you should always be cautious when you look at any rating,” she said. For one thing, only publicly available data is considered, and the data is from a few months ago.

“It is looking back in time,” she said.

“We don’t tend to put a lot of stock into particular rating agencies,” Oswald Poels said.

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Ratings for selected banks operating in south-central Wisconsin

Ratings based on Dec. 31, 2014 data, filed with the Federal Deposit Insurance Corp.

* WPS Community Bank became part of Starion Financial in April 2015.

Institution Headquarters Bankrate.com Bauer Financial
American Bank & Trust Cuba City 4 4
American National Bank Beaver Dam 3 4
AnchorBank Madison 3 3
Associated Bank Green Bay 4 5
BMO Harris Bank Chicago, Ill. 4 4
Badger Bank Fort Atkinson 4 4
Bank Mutual Brown Deer 4 5
Bank of Brodhead Brodhead 5 5
Bank of Deerfield Deerfield 5 4
Bank of Lake Mills Lake Mills 5 5
Bank of Mauston Mauston 4 3.5
Bank of Milton Milton 4 4
Bank of New Glarus New Glarus 4 5
Bank of Poynette Poynette 4 5
Bank of Prairie du Sac Prairie du Sac 5 5
Bank of Sun Prairie Sun Prairie 4 5
Bank of Wisconsin Dells Wisconsin Dells 4 5
Bankers Bank Madison 5 5
Baraboo National Bank Baraboo 3 3
Blackhawk Bank Beloit 3 5
Cambridge State Bank Cambridge 4 3.5
Capitol Bank Madison 4 4
Citizens First Bank Viroqua 4 5
Clare Bank Platteville 4 5
Community First Bank Boscobel 4 5
DMB Community Bank DeForest 4 4
Farmers & Merchants Bank Orfordville 4 5
Farmers and Merchants Bank Tomah 3 3.5
Farmers & Merchants State Bank Waterloo 4 4
Farmers & Merchants Union Bank Columbus 4 5
Farmers Savings Bank Mineral Point 4 5
Farmers State Bank Hillsboro 4 5
First Bank Tomah 3 3.5
First Business Bank Madison 5 4
First Community Bank Milton 4 4
First National Bank & Trust Beloit 4 5
First National Bank Darlington 5 5
Greenwoods State Bank Lake Mills 4 4
Guaranty Bank Milwaukee 1 0
Highland State Bank Highland 4 5
Home Savings Bank Madison 3 2
JP Morgan Chase Bank Columbus, Ohio 4 4
John Deere Financial Madison 5 5
Johnson Bank Racine 4 5
Livingston State Bank Livingston 4 5
McFarland State Bank McFarland 4 3.5
Mid America Bank Janesville 3 3
Middleton Community Bank Middleton 4 5
Monona State Bank Monona 4 4
Mound City Bank Platteville 4 5
National Bank of Waupun Waupun 4 3.5
Oak Bank Fitchburg 4 5
Oregon Community Bank & Trust Oregon 5 3.5
Park Bank Madison 4 5
Peoples Community Bank Mazomanie 4 5
Peoples State Bank Prairie du Chien 5 5
PremierBank Fort Atkinson 4 4
Richland County Bank Richland Center 4 5
Royal Bank Elroy 4 5
Settlers Bank DeForest 4 4
Starion Financial Bismarck, N.D. 4 5
State Bank of Cazenovia Cazenovia 5 5
State Bank of Cross Plains Cross Plains 3 3
State Bank of Reeseville Reeseville 4 5
Timberwood Bank Tomah 4 5
Town & Country Bank Watertown 3 3.5
Town Bank Hartland 4 5
U.S. Bank Cincinnati, Ohio 5 4
Union Bank & Trust Evansville 4 5
WPS Community Bank* Madison 4 5
Wells Fargo Bank Sioux Falls, S.D. 4 4
Wisconsin Bank & Trust Madison 4 4
Wisconsin River Bank Sauk City 4 5

Judy Newman is a business reporter for the Wisconsin State Journal.