Safe and Sound

Bank of Pontiac

Pontiac, IL
5
Star Rating
Bank of Pontiac is a Pontiac, IL-based, FDIC-insured bank that opened its doors in 1947. As of December 31, 2017, the bank had equity of $64.8 million on assets of $514.5 million.

U.S. bank customers have $438.6 million on deposit at 8 offices in IL run by 91 full-time employees. With that footprint, the bank currently holds loans and leases worth $367.7 million, $263.7 million of which are for real estate.

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

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital is an essential measurement of a bank's financial resilience. It works as a cushion against losses and affords protection for accountholders during periods of financial trouble for the bank. When looking at safety and soundness, the more capital, the better.

On our test to measure capital adequacy, Bank of Pontiac racked up 16 out of a possible 30 points, exceeding the national average of 13.13.

A bank's Tier 1 capital ratio is an essential measure of this buffer. Bank of Pontiac's Tier 1 capital ratio was 19.20 percent, higher than the 6 percent level regulators consider adequate, but lower than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to financial difficulties.

Overall, Bank of Pontiac held equity amounting to 12.60 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 troubled assets, such as past-due mortgages, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

A bank with a large number of these types of assets may eventually be forced 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 thus aren't earning interest for the bank, resulting in depressed earnings and potentially more risk of a future failure.

Bank of Pontiac scored above 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 useful indicator of asset quality.As of December 31, 2017, 0.59 percent of Bank of Pontiac'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 . The size of that reserve can be a useful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on Bank of Pontiac's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance affects its long-term survivability. A bank can retain its earnings, boosting its capital buffer, or use them to address problematic loans, potentially making the bank better able to withstand financial shocks. Losses, on the other hand, diminish a bank's ability to do those things.

Bank of Pontiac scored 16 out of a possible 30 on Bankrate's test of earnings, better than the national average of 15.12.

One widely used way to measure a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by the total amount of equity. Bank of Pontiac's most recent annualized quarterly return on equity was 7.80 percent, below the national average of 8.10 percent.

The bank reported net income of $5.1 million on total equity of $64.8 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 0.99 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.