Safe and Sound

Bank of Montgomery

Montgomery, IL
3
Star Rating
Bank of Montgomery is an FDIC-insured bank founded in 1972 and currently headquartered in Montgomery, IL. The bank has equity of $3.9 million on assets of $44.5 million, according to December 31, 2017, regulatory filings.

Thanks to the efforts of 7 full-time employees, the bank holds loans and leases worth $15.7 million, including $8.7 million worth of real estate loans. U.S. bank customers currently have $40.6 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Bank of Montgomery exhibited a generally satisfactory condition, earning 3 out of 5 stars for safety and soundness. Keep reading for an analysis of how the bank fared on the three important criteria Bankrate used to score American banks.

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SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital is a key measurement of an institution's financial resilience. It acts as a cushion against losses and provides protection for depositors when a bank is struggling financially. From a safety and soundness perspective, the higher the capital, the better.

Bank of Montgomery came in below the national average of 13.13 on our test to measure capital adequacy, racking up 8 out of a possible 30 points.

One widely followed measure of this buffer is a bank's Tier 1 capital ratio. Bank of Montgomery's Tier 1 capital ratio was 18.83 percent, above the 6 percent level regulators consider adequate, but under the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to financial downturns.

Overall, Bank of Montgomery held equity amounting to 8.73 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to estimate how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by troubled assets, such as unpaid mortgages.

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

Bank of Montgomery beat out the national average of 37.49 on Bankrate's asset quality test, racking up 40 out of a possible 40 points .

A helpful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.81 percent of Bank of Montgomery'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." How large that reserve is can be a useful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on Bank of Montgomery's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance has an effect on its safety and soundness. Earnings can be retained by the bank, expanding its capital cushion, or be used to address problematic loans, potentially making the bank better prepared to withstand financial trouble. Conversely, losses diminish a bank's ability to do those things.

On Bankrate's test of earnings, Bank of Montgomery scored 4 out of a possible 30, failing to reach 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, basically) by the total amount of equity. Bank of Montgomery's most recent annualized quarterly return on equity was 0.97 percent, below the national average of 8.10 percent.

The bank earned net income of $39,000 on total equity of $3.9 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 0.09 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.