Safe and Sound

Colchester State Bank

Colchester, IL
5
Star Rating
Colchester State Bank is an FDIC-insured bank founded in 1963 and currently headquartered in Colchester, IL. The bank has equity of $9.2 million on assets of $63.5 million, according to December 31, 2017, regulatory filings.

Thanks to the work of 8 full-time employees, the bank holds loans and leases worth $23.6 million, $18.3 million of which are for real estate. U.S. bank customers currently have $54.1 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Colchester State Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a look at how the bank did on the three major criteria Bankrate used to grade U.S. banks on safety and soundness.

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SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a bulwark against losses and provides protection for depositors when a bank is experiencing economic trouble. Therefore, when it comes to measuring an a bank's financial stability, capital is important. When it comes to safety and soundness, more capital is better.

Colchester State Bank scored 20 out of a possible 30 points on our test to measure the adequacy of a bank's capital, beating out the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Colchester State Bank's Tier 1 capital ratio was 31.48 percent, exceeding the 6 percent level considered adequate by regulators, and exceeding the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather economic downturns.

Overall, Colchester State Bank held equity amounting to 14.53 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 loans, on the bank's loan loss reserves and overall capitalization.

Having extensive holdings of these types of assets means a bank may have to use capital to cover losses, reducing its cushion of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning interest for the bank, decreasing earnings and elevating the risk of a failure in the future.

Colchester State Bank exceeded the national average of 37.49 on Bankrate's asset quality test, racking up 40 out of a possible 40 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, 2.39 percent of Colchester State Bank's loans were noncurrent, meaning they were more than 90 days past due or were in non-accrual status. That's above the national average of 1.01 percent.

Banks maintain a reserve to handle troubled assets known as an "allowance for loan and lease losses." Comparing the reserve's size to the total amount of problem loans can be a handy indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Colchester State Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability has an effect on its long-term survivability. A bank can retain its earnings, boosting its capital buffer, or put them to work addressing problematic loans, likely making the bank more resilient in times of trouble. Banks that are losing money, however, have less ability to do those things.

On Bankrate's test of earnings, Colchester State Bank scored 12 out of a possible 30, lower than the national average of 15.12.

Return on equity, calculated by dividing net income (essentially, profit) by total equity, is one important way to measure a bank's earnings. Colchester State Bank's most recent annualized quarterly return on equity was 5.59 percent, below the national average of 8.10 percent.

The bank recorded net income of $505,000 on total equity of $9.2 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 0.82 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.