Safe and Sound

Bank of Bluffs

Bluffs, IL
4
Star Rating
Bluffs, IL-based Bank of Bluffs is an FDIC-insured bank founded in 1893. As of December 31, 2017, the bank had equity of $8.2 million on assets of $54.8 million.

U.S. bank customers have $46.4 million on deposit at 2 offices in IL run by 14 full-time employees. With that footprint, the bank has amassed loans and leases worth $34.9 million, $25.3 million of which are for real estate.

Overall, Bankrate believes that, as of December 31, 2017, Bank of Bluffs exhibited a good condition, earning 4 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 American banks.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial stability, capital is valuable. It acts as a bulwark against losses and affords protection for depositors when a bank is struggling financially. When looking at safety and soundness, the more capital, the better.

Bank of Bluffs scored above the national average of 13.13 points on our test to measure the adequacy of a bank's capital, achieving a score of 20 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Bank of Bluffs's Tier 1 capital ratio was 23.58 percent, above the 6 percent level considered adequate by regulators, but lower than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather financial challenges.

Overall, Bank of Bluffs held equity amounting to 14.89 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to determine the effect of troubled assets, such as unpaid mortgages, on the bank's capitalization and allocated loan loss reserves.

A bank with extensive holdings of these kinds of assets could eventually be forced to use capital to absorb losses, cutting down on its cushion of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, decreasing earnings and increasing the chances of a future failure.

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

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, 0.70 percent of Bank of Bluffs's loans were noncurrent -- in other words, 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 known as an "allowance for loan and lease losses" to deal with troubled assets . That reserve's size can be a helpful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on Bank of Bluffs's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability has an effect on its safety and soundness. Earnings may be retained by the bank, increasing its capital cushion, or be used to deal with problematic loans, likely making the bank better prepared to withstand financial shocks. Obviously, banks that are losing money are less able to do those things.

Bank of Bluffs scored 4 out of a possible 30 on Bankrate's earnings test, less than the national average of 15.12.

One widely used measure of a bank's earnings is return on equity, calculated by dividing net income (profit, essentially) by total equity. The most recent annualized quarterly return on equity for Bank of Bluffs was 1.07 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $87,000 on total equity of $8.2 million. The bank had an annualized return on average assets, or ROA, of 0.15 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.