Elgin State Bank

THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial resilience, capital is important. It works as a cushion against losses and as protection for depositors when a bank is experiencing financial trouble. When looking at safety and soundness, the higher the capital, the better.

Elgin State Bank received a score of 4 out of a possible 30 points on our test to measure capital adequacy, below the national average of 13.13.

One widely used measure of this buffer is a bank's Tier 1 capital ratio. Elgin State Bank's Tier 1 capital ratio was 16.99 percent, higher than the 6 percent level considered adequate by regulators, but below the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather financial headwinds.

Overall, Elgin State Bank held equity amounting to 6.44 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to determine 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.

Having extensive holdings of these kinds of assets could eventually require a bank to use capital to cover losses, decreasing its equity cushion. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, reducing earnings and increasing the risk of a failure in the future.

Elgin State Bank scored 40 out of a possible 40 points on Bankrate's test of asset quality, exceeding the national average of 37.49.

A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.09 percent of Elgin State 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 keep a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . Comparing how large that reserve is to the total amount of problem loans can be a useful indicator when evaluating a bank's ability to manage troubled assets. Elgin State Bank's loan loss allowance was 1,233.33 percent of its total noncurrent loans, exceeding the national average. All things being equal, a higher ratio of loan loss allowance to noncurrent loans is better.

Earnings score

A bank's earnings performance affects its long-term survivability. Earnings can be retained by the bank, boosting its capital cushion, or be used to deal with problematic loans, likely making the bank more resilient in tough times. Conversely, losses reduce a bank's ability to do those things.

Elgin State Bank scored 2 out of a possible 30 on Bankrate's test of earnings, failing to reach the national average of 15.12.

Return on equity, calculated by dividing net income (profit, basically) by the total amount of equity, is one widely used measure of a bank's earnings. The most recent annualized quarterly return on equity for Elgin State Bank was 0.82 percent, below the national average of 8.10 percent.

The bank earned net income of $13,000 on total equity of $1.6 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 0.05 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below the average for U.S. banks of 1.00 percent.