Safe and Sound

Bank of Elgin

Elgin, NE
5
Star Rating
Bank of Elgin is an Elgin, NE-based, FDIC-insured bank that opened its doors in 1935. As of December 31, 2017, the bank had equity of $7.7 million on assets of $59.4 million.

Thanks to the work of 8 full-time employees, the bank currently holds loans and leases worth $41.9 million, $15.2 million of which are for real estate. U.S. bank customers currently have $49.7 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Bank of Elgin exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for an analysis of how the bank did on the three important criteria Bankrate used to grade U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial resilience, capital is useful. It acts as a bulwark against losses and provides protection for accountholders during times of economic instability for the bank. When it comes to safety and soundness, the higher the capital, the better.

Bank of Elgin scored 16 out of a possible 30 points on our test to measure the adequacy of a bank's capital, better than the national average of 13.13.

A bank's Tier 1 capital ratio is a widely followed measure of this buffer. Bank of Elgin's Tier 1 capital ratio was 16.71 percent, above the 6 percent level considered adequate by regulators, but below the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather financial headwinds.

Overall, Bank of Elgin held equity amounting to 12.99 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to estimate the impact of problem assets, such as past-due mortgages, on the bank's capitalization and allocated loan loss reserves.

A bank with a large number of these kinds of assets may eventually have to use capital to absorb losses, cutting down on its cushion of equity. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning money, resulting in diminished earnings and potentially more risk of a failure in the future.

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

A handy indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, none of Bank of Elgin'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 maintain a reserve known as an "allowance for loan and lease losses" to deal with problem assets . Comparing how large that reserve is to the total amount of at-risk loans can be a handy indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Bank of Elgin's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its long-term survivability. A bank can retain its earnings, giving a boost to its capital buffer, or put them to work addressing problematic loans, likely making the bank better prepared to withstand financial trouble. Conversely, losses reduce a bank's ability to do those things.

On Bankrate's test of earnings, Bank of Elgin scored 22 out of a possible 30, above the national average of 15.12.

Return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for Bank of Elgin was 14.78 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $1.1 million on total equity of $7.7 million. The bank experienced an annualized return on average assets, or ROA, of 1.85 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above 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.