Safe and Sound

McHenry Savings Bank

Mchenry, IL
1
Star Rating
McHenry Savings Bank is an FDIC-insured bank started in 1955 and currently headquartered in Mchenry, IL. As of December 31, 2017, the bank held equity of $8.0 million on $222.6 million in assets.

With 56 full-time employees in 3 offices in IL, the bank holds loans and leases worth $149.4 million, including real estate loans of $109.0 million. U.S. bank customers currently have $184.4 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, McHenry Savings Bank exhibited a significantly below-average condition, earning 1 out of 5 stars for safety and soundness. Here's an analysis of 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

Capital acts as a cushion against losses and as protection for account holders during times of financial trouble for the bank. Therefore, when it comes to measuring an a bank's financial fortitude, capital is important. When looking at safety and soundness, the higher the capital, the better.

McHenry Savings Bank scored below the national average of 13.13 on our test to measure capital adequacy, racking up 0 out of a possible 30 points.

One essential measure of this buffer is a bank's Tier 1 capital ratio. McHenry Savings Bank's Tier 1 capital ratio was 5.73 percent, less than the 6 percent level considered adequate by regulators, and under the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to economic challenges.

Overall, McHenry Savings Bank held equity amounting to 3.60 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 effect of troubled assets, such as unpaid loans, on the bank's loan loss reserves and overall capitalization.

A bank with a large number of these types of assets could eventually have to use capital to absorb losses, shrinking its equity buffer. 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, resulting in depressed earnings and potentially more risk of a future failure.

McHenry Savings Bank scored 4 out of a possible 40 points on Bankrate's asset quality test, lower than the national average of 37.49.

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, 3.04 percent of McHenry Savings Bank's loans were noncurrent -- in other words, 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 keep a reserve known as an "allowance for loan and lease losses" to deal with problem assets . The size of that reserve can be a helpful 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 McHenry Savings Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its long-term survivability. Earnings may be retained by the bank, increasing its capital buffer, or be used to deal with problematic loans, likely making the bank more resilient in tough times. Banks that are losing money, however, are less able to do those things.

McHenry Savings Bank fell short of the national average on Bankrate's test of earnings, achieving a score of 0 out of a possible 30.

One key way to measure a bank's earnings is return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity. McHenry Savings Bank's most recent annualized quarterly return on equity was -11.48 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $-990,000 on total equity of $8.0 million. The bank had an annualized return on average assets, or ROA, of -0.42 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.