Safe and Sound

Shelby County State Bank

Shelbyville, IL
5
Star Rating
Shelbyville, IL-based Shelby County State Bank is an FDIC-insured bank founded in 1895. The bank has equity of $23.1 million on $234.8 million in assets, according to December 31, 2017, regulatory filings.

U.S. bank customers have $195.9 million on deposit at 6 offices in IL run by 55 full-time employees. With that footprint, the bank holds loans and leases worth $186.4 million, including $127.6 million worth of real estate loans.

Overall, Bankrate believes that, as of December 31, 2017, Shelby County State Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for an analysis of how the bank fared on the three important criteria Bankrate used to grade U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a bulwark against losses and affords protection for account holders when a bank is struggling financially. Therefore, when it comes to measuring an a bank's financial fortitude, capital is key. When it comes to safety and soundness, the higher the capital, the better.

Shelby County State Bank scored below the national average of 13.13 on our test to measure the adequacy of a bank's capital, racking up 10 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Shelby County State Bank's Tier 1 capital ratio was 12.91 percent, above the 6 percent level regulators consider adequate, but lower than the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to economic challenges.

Overall, Shelby County State Bank held equity amounting to 9.86 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 problem assets, such as past-due mortgages, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

A bank with extensive holdings of these kinds of assets could eventually be forced to use capital to cover losses, reducing its buffer of equity. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, resulting in reduced earnings and potentially more risk of a future failure.

Shelby County State Bank did better than the national average of 37.49 on Bankrate's asset quality test, racking up 40 out of a possible 40 points .

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, 0.03 percent of Shelby County 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 keep a reserve known as an "allowance for loan and lease losses" to deal with problem assets . How large that reserve is can be a helpful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problem loans. Shelby County State Bank's loan loss allowance was 2,596.55 percent of its total noncurrent loans, exceeding the national average. All else being equal, a higher ratio of loan loss allowance to noncurrent loans is better.

Earnings score

A bank's ability to earn money has an effect on its long-term survivability. A bank can retain its earnings, expanding its capital cushion, or put them to work addressing problematic loans, likely making the bank better prepared to withstand economic trouble. Conversely, losses lessen a bank's ability to do those things.

On Bankrate's earnings test, Shelby County State Bank scored 20 out of a possible 30, exceeding the national average of 15.12.

One key measure of a bank's earnings is return on equity, or net income (profit, basically) divided by total equity. Shelby County State Bank's most recent annualized quarterly return on equity was 11.94 percent, above the national average of 8.10 percent.

The bank earned net income of $2.7 million on total equity of $23.1 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 1.21 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.