Safe and Sound

Community Banks of Shelby County

Cowden, IL
4
Star Rating
Community Banks of Shelby County is an FDIC-insured bank founded in 1892 and currently headquartered in Cowden, IL. As of December 31, 2017, the bank had equity of $5.5 million on assets of $46.9 million.

U.S. bank customers have $41.4 million on deposit at 3 offices in IL run by 20 full-time employees. With that footprint, the bank has amassed loans and leases worth $25.7 million, including real estate loans of $16.8 million.

Overall, Bankrate believes that, as of December 31, 2017, Community Banks of Shelby County exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a look at how the bank did on the three key criteria Bankrate used to grade U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial stability, capital is key. It works as a buffer against losses and as protection for accountholders when a bank is experiencing financial trouble. When it comes to safety and soundness, the more capital, the better.

Community Banks of Shelby County scored above the national average of 13.13 points on our test to measure capital adequacy, racking up 14 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Community Banks of Shelby County's Tier 1 capital ratio was 19.56 percent, exceeding the 6 percent level regulators consider adequate, but below the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to economic downturns.

Overall, Community Banks of Shelby County held equity amounting to 11.65 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to estimate the impact of troubled 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 kinds of assets could eventually be forced to use capital to cover losses, diminishing its cushion of equity. It also means that there are likely to be many assets that are in non-accrual status and no longer earning interest for the bank, decreasing earnings and increasing the risk of a failure in the future.

On Bankrate's test of asset quality, Community Banks of Shelby County scored 40 out of a possible 40 points, beating the national average of 37.49 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, 0.15 percent of Community Banks of Shelby County'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 known as an "allowance for loan and lease losses" to deal with problem assets . How large that reserve is can be a widely used indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on Community Banks of Shelby County's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance 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, potentially making the bank more resilient in times of trouble. Conversely, losses diminish a bank's ability to do those things.

Community Banks of Shelby County underperformed the average on Bankrate's test of earnings, achieving a score of 8 out of a possible 30.

One widely used way to measure a bank's earnings is return on equity, or net income (profit, essentially) divided by the total amount of equity. Community Banks of Shelby County's most recent annualized quarterly return on equity was 3.46 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $188,000 on total equity of $5.5 million. The bank experienced an annualized return on average assets, or ROA, of 0.40 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.