Safe and Sound

Southern Illinois Bank

Johnston City, IL
5
Star Rating
Founded in 1999, Southern Illinois Bank is an FDIC-insured bank headquartered in Johnston City, IL. As of June 30, 2017, the bank had equity of $12.1 million on assets of $102.6 million.

U.S. bank customers have $89.9 million on deposit at 4 offices in IL run by 24 full-time employees. With that footprint, the bank currently holds loans and leases worth $65.1 million, including real estate loans of $53.4 million.

Overall, Bankrate believes that, as of June 30, 2017, Southern Illinois Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's an analysis of how the bank faired on the three major criteria Bankrate used to evaluate American 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 as protection for accountholders when a bank is struggling financially. It follows then that when it comes to measuring an a bank's financial strength, capital is important. From a safety and soundness perspective, the more capital, the better.
On our test to measure capital adequacy, Southern Illinois Bank scored 14 out of a possible 30 points, exceeding the national average of 13.38.

One commonly used measure of this buffer is a bank's Tier 1 capital ratio. Southern Illinois Bank's Tier 1 capital ratio was 16.52 percent, exceeding the 6 percent level regulators consider adequate, but below the national average of 25.16 percent. A higher capital ratio means the bank will be better able to weather economic headwinds.

Overall, Southern Illinois Bank held equity amounting to 11.79 percent of its assets, which was lower than the national average of 12.10 percent.

Asset Quality Score

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

Having extensive holdings of these kinds of assets may eventually require a bank to use capital to cover losses, cutting down on its equity cushion. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning money, decreasing earnings and elevating the chances of a future failure.

On Bankrate's test of asset quality, Southern Illinois Bank scored 40 out of a possible 40 points, beating out the national average of 37.62 points.

A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of June 30, 2017, 0.07 percent of Southern Illinois 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 1.04 percent.

Banks keep a reserve known as an "allowance for loan and lease losses" to deal with problem assets . The size of that reserve can be a helpful 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 Southern Illinois Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its safety and soundness. Earnings may be retained by the bank, giving a boost to its capital buffer, or be used to deal with problematic loans, likely making the bank better prepared to withstand financial shocks. Banks that are losing money, however, are less able to do those things.

On Bankrate's test of earnings, Southern Illinois Bank scored 16 out of a possible 30, coming in below the national average of 16.52.

One widely used measure of a bank's earnings is return on equity, or net income (profit, essentially) divided by total equity. Southern Illinois Bank's most recent annualized quarterly return on equity was 7.92 percent, below the national average of 9.28 percent.

The bank reported net income of $464,000 on total equity of $12.1 million for the twelve months ended June 30, 2017. The bank experienced 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 1.14 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.