Safe and Sound

Byron Bank

Byron, IL
5
Star Rating
Byron Bank is an FDIC-insured bank founded in 1932 and currently based in Byron, IL. The bank holds equity of $26.3 million on $250.2 million in assets, according to December 31, 2017, regulatory filings.

With 58 full-time employees in 5 offices in IL, the bank currently holds loans and leases worth $132.5 million, including real estate loans of $106.2 million. U.S. bank customers currently have $222.0 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Byron Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a breakdown of how the bank fared on the three major criteria Bankrate used to score American banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a cushion against losses and as protection for account holders when a bank is struggling financially. Therefore, a bank's level of capital is an essential measurement of a bank's financial fortitude. When looking at safety and soundness, more capital is preferred.

Byron Bank finished below the national average of 13.13 on our test to measure the adequacy of a bank's capital, receiving a score of 12 out of a possible 30 points.

A bank's Tier 1 capital ratio is a commonly used measure of this buffer. Byron Bank's Tier 1 capital ratio was 16.89 percent, higher than the 6 percent level considered adequate by regulators, but below the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather economic challenges.

Overall, Byron Bank held equity amounting to 10.51 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to estimate the impact of problem assets, such as unpaid mortgages, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

A bank with lots of these types of assets could eventually be forced to use capital to absorb losses, shrinking 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, diminishing earnings and elevating the chances of a future failure.

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

The percentage of problem assets a bank holds compared to its total assets is a widely used indicator of asset quality.As of December 31, 2017, 0.85 percent of Byron Bank'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 maintain a reserve to handle problem assets known as an "allowance for loan and lease losses." That reserve's size 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 Byron Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money affects its safety and soundness. Earnings may be retained by the bank, expanding its capital buffer, or be used to address problematic loans, likely making the bank more resilient in tough times. Obviously, banks that are losing money are less able to do those things.

Byron Bank scored 20 out of a possible 30 on Bankrate's test of earnings, above the national average of 15.12.

One important way to measure a bank's earnings is return on equity, or net income (profit, essentially) divided by total equity. The most recent annualized quarterly return on equity for Byron Bank was 11.89 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $3.1 million on total equity of $26.3 million. The bank experienced an annualized return on average assets, or ROA, of 1.24 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.