Safe and Sound

Middletown State Bank

Middletown, IL
5
Star Rating
Middletown, IL-based Middletown State Bank is an FDIC-insured bank started in 1917. As of December 31, 2017, the bank had equity of $3.5 million on $37.7 million in assets.

Thanks to the efforts of 7 full-time employees in 3 offices in IL, the bank holds loans and leases worth $28.2 million, including real estate loans of $23.1 million. U.S. bank customers currently have $32.2 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Middletown 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 important criteria Bankrate used to evaluate American banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

Capital acts as a buffer against losses and affords protection for depositors when a bank is experiencing financial trouble. It follows then that when it comes to measuring an a bank's financial strength, capital is essential. When looking at safety and soundness, the higher the capital, the better.

Middletown State Bank received a score of 10 out of a possible 30 points on our test to measure the adequacy of a bank's capital, less than the national average of 13.13.

One essential measure of this buffer is a bank's Tier 1 capital ratio. Middletown State Bank's Tier 1 capital ratio was 13.61 percent, higher than the 6 percent level regulators consider adequate, but less than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather economic downturns.

Overall, Middletown State Bank held equity amounting to 9.40 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to estimate how the bank's loan loss reserves and overall capitalization could be affected by problem assets, such as past-due loans.

Having extensive holdings of these kinds of assets could eventually require a bank to use capital to cover losses, diminishing its equity buffer. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, resulting in reduced earnings and potentially more risk of a future failure.

Middletown 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, 0.03 percent of Middletown State Bank'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 maintain a reserve to handle problem assets known as an "allowance for loan and lease losses." How large that reserve is can be a widely used indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problematic loans. Middletown State Bank's loan loss allowance was 1,644.44 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 ability to earn money affects its safety and soundness. A bank can retain its earnings, expanding its capital buffer, or put them to work addressing problematic loans, potentially making the bank more resilient in tough times. Losses, on the other hand, lessen a bank's ability to do those things.

On Bankrate's earnings test, Middletown State Bank scored 26 out of a possible 30, exceeding the national average of 15.12.

Return on equity, calculated by dividing net income (essentially, profit) by the total amount of equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for Middletown State Bank was 18.02 percent, above the national average of 8.10 percent.

The bank reported net income of $632,000 on total equity of $3.5 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 1.84 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.