Safe and Sound

Midwest Community Bank

Freeport, IL
4
Star Rating
Freeport, IL-based Midwest Community Bank is an FDIC-insured bank started in 1966. Regulatory filings show the bank having equity of $26.4 million on $219.3 million in assets, as of December 31, 2017.

U.S. bank customers have $191.9 million on deposit at 3 offices in IL run by 160 full-time employees. With that footprint, the bank currently holds loans and leases worth $172.2 million, including real estate loans of $147.3 million.

Overall, Bankrate believes that, as of December 31, 2017, Midwest Community Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for an analysis of how the bank did on the three important criteria Bankrate used to grade American banks.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital is an essential measurement of an institution's financial resilience. It works as a cushion against losses and as protection for depositors when a bank is struggling financially. When it comes to safety and soundness, more capital is better.

Midwest Community Bank received a score of 12 out of a possible 30 points on our test to measure the adequacy of a bank's capital, below the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Midwest Community Bank's Tier 1 capital ratio was 13.82 percent, above the 6 percent level regulators consider adequate, but lower than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to economic difficulties.

Overall, Midwest Community Bank held equity amounting to 11.77 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 troubled assets, such as past-due mortgages, on the bank's capitalization and allocated loan loss reserves.

A bank with a large number of these kinds of assets may eventually have to use capital to absorb losses, decreasing its buffer of equity. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning money, decreasing earnings and elevating the risk of a future failure.

Midwest Community Bank scored 32 out of a possible 40 points on Bankrate's asset quality test, less than the national average of 37.49.

The percentage of problem assets a bank holds compared to its total assets is a useful indicator of asset quality.As of December 31, 2017, 0.50 percent of Midwest Community 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 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 Midwest Community Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its safety and soundness. Earnings can be retained by the bank, increasing its capital buffer, or be used to deal with problematic loans, potentially 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 earnings test, Midwest Community Bank scored 20 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 widely used measure of a bank's earnings. Midwest Community Bank's most recent annualized quarterly return on equity was 11.86 percent, above the national average of 8.10 percent.

The bank recorded net income of $3.0 million on total equity of $26.4 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 1.35 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.