Safe and Sound

Raritan State Bank

Raritan, IL
4
Star Rating
Raritan State Bank is a Raritan, IL-based, FDIC-insured bank founded in 1920. As of December 31, 2017, the bank held equity of $18.8 million on assets of $166.4 million.

U.S. bank customers have $143.7 million on deposit at 3 offices in IL run by 31 full-time employees. With that footprint, the bank has amassed loans and leases worth $129.7 million, including $68.0 million worth of real estate loans.

Overall, Bankrate believes that, as of December 31, 2017, Raritan State Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a breakdown of how the bank fared on the three major criteria Bankrate used to grade American banks.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial strength, capital is essential. It works as a buffer against losses and affords protection for depositors when a bank is struggling financially. From a safety and soundness perspective, the more capital, the better.

Raritan State Bank achieved a score of 14 out of a possible 30 points on our test to measure capital adequacy, exceeding the national average of 13.13.

One commonly used measure of this buffer is a bank's Tier 1 capital ratio. Raritan State Bank's Tier 1 capital ratio was 15.26 percent, higher than the 6 percent level considered adequate by regulators, but under the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather economic headwinds.

Overall, Raritan State Bank held equity amounting to 11.29 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to estimate the effect of troubled assets, such as past-due loans, on the bank's loan loss reserves and overall capitalization.

Having large numbers of these kinds of assets suggests a bank could eventually have to use capital to cover losses, diminishing its equity cushion. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, resulting in depressed earnings and potentially more risk of a future failure.

On Bankrate's asset quality test, Raritan State Bank scored 32 out of a possible 40 points, less than the national average of 37.49 points.

A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 2.89 percent of Raritan 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 above the national average of 1.01 percent.

Banks maintain a reserve to handle problem assets known as an "allowance for loan and lease losses." Comparing the size of that reserve to the total amount of problematic loans can be a handy indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Raritan State Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability affects its long-term survivability. Earnings can be retained by the bank, giving a boost to its capital buffer, or be used to address problematic loans, likely making the bank more resilient in times of trouble. Banks that are losing money, however, have less ability to do those things.

Raritan State Bank fell short of the national average on Bankrate's earnings test, achieving a score of 14 out of a possible 30.

Return on equity, calculated by dividing net income (essentially, profit) by total equity, is one key measure of a bank's earnings. The most recent annualized quarterly return on equity for Raritan State Bank was 6.33 percent, below the national average of 8.10 percent.

The bank earned net income of $1.2 million on total equity of $18.8 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 0.71 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.