Safe and Sound

Algonquin State Bank

2
Star Rating
Started in 1902, Algonquin State Bank is an FDIC-insured bank based in Algonquin, IL. As of December 31, 2017, the bank held equity of $14.2 million on $141.4 million in assets.

U.S. bank customers have $126.9 million on deposit at 4 offices in IL run by 26 full-time employees. With that footprint, the bank has amassed loans and leases worth $62.4 million, including real estate loans of $40.5 million.

Overall, Bankrate believes that, as of December 31, 2017, Algonquin State Bank exhibited a below-average condition, earning 2 out of 5 stars for safety and soundness. Here's a breakdown of how the bank fared on the three key criteria Bankrate used to evaluate U.S. banks.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial strength, capital is key. It acts as a cushion against losses and as protection for depositors when a bank is struggling financially. When it comes to safety and soundness, the more capital, the better.

Algonquin State Bank came in below the national average of 13.13 on our test to measure the adequacy of a bank's capital, racking up 10 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Algonquin State Bank's Tier 1 capital ratio was 18.39 percent, exceeding the 6 percent level considered adequate by regulators, but under the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to financial challenges.

Overall, Algonquin State Bank held equity amounting to 10.05 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

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

Having a large number of these kinds of assets suggests a bank may eventually have to use capital to cover losses, cutting down on its equity buffer. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, resulting in depressed earnings and potentially more risk of a future failure.

Algonquin State Bank scored 32 out of a possible 40 points on Bankrate's test of asset quality, failing to reach the national average of 37.49.

A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.25 percent of Algonquin State 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 keep a reserve to handle troubled assets known as an "allowance for loan and lease losses." Comparing how large that reserve is to the total amount of at-risk 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 Algonquin State Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance has an effect on its long-term survivability. A bank can retain its earnings, giving a boost to its capital cushion, or put them to work addressing problematic loans, likely making the bank better able to withstand financial trouble. Banks that are losing money, however, have less ability to do those things.

Algonquin State Bank fell behind the national average on Bankrate's test of earnings, achieving a score of 2 out of a possible 30.

One important way to measure a bank's earnings is return on equity, calculated by dividing net income (profit, basically) by the total amount of equity. The most recent annualized quarterly return on equity for Algonquin State Bank was 0.06 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $9,000 on total equity of $14.2 million. The bank experienced 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.