Safe and Sound

A J Smith Federal Savings Bank

Midlothian, IL
4
Star Rating
Founded in 1924, A J Smith Federal Savings Bank is an FDIC-insured bank based in Midlothian, IL. As of December 31, 2017, the bank held equity of $29.3 million on assets of $192.7 million.

With 38 full-time employees in 3 offices in IL, the bank has amassed loans and leases worth $104.1 million, including real estate loans of $104.8 million. U.S. bank customers currently have $159.8 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, A J Smith Federal Savings Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a breakdown of how the bank did on the three major criteria Bankrate used to score American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a cushion against losses and as protection for depositors when a bank is struggling financially. Therefore, a bank's level of capital is an essential measurement of an institution's financial fortitude. When it comes to safety and soundness, the higher the capital, the better.

On our test to measure capital adequacy, A J Smith Federal Savings Bank scored 22 out of a possible 30 points, above the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. A J Smith Federal Savings Bank's Tier 1 capital ratio was 36.71 percent, higher than the 6 percent level considered adequate by regulators, and higher than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to financial challenges.

Overall, A J Smith Federal Savings Bank held equity amounting to 15.20 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

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

Having a large number of these types of assets means a bank could eventually have to use capital to cover losses, decreasing its buffer of equity. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, resulting in reduced earnings and potentially more risk of a failure in the future.

A J Smith Federal Savings Bank exceeded the national average of 37.49 on Bankrate's asset quality test, racking up 40 out of a possible 40 points .

The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of December 31, 2017, 1.11 percent of A J Smith Federal Savings Bank's loans were noncurrent -- in other words, they were more than 90 days past due or were in non-accrual status. That's above the national average of 1.01 percent.

Banks keep a reserve known as an "allowance for loan and lease losses" to deal with problem assets . Comparing the size of that reserve to the total amount of problematic loans can be a widely used indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on A J Smith Federal Savings Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its long-term survivability. Earnings can be retained by the bank, expanding its capital cushion, or be used to deal with problematic loans, potentially making the bank better able to withstand economic shocks. Losses, on the other hand, lessen a bank's ability to do those things.

On Bankrate's test of earnings, A J Smith Federal Savings Bank scored 2 out of a possible 30, falling short of the national average of 15.12.

Return on equity, calculated by dividing net income (profit, basically) by the total amount of equity, is one important way to measure a bank's earnings. A J Smith Federal Savings Bank's most recent annualized quarterly return on equity was 0.04 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $13,000 on total equity of $29.3 million. The bank reported an annualized return on average assets, or ROA, of 0.01 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.