Safe and Sound

Tempo Bank, A Federal Savings Bank

Trenton, IL
4
Star Rating
Tempo Bank, A Federal Savings Bank is an FDIC-insured bank started in 1889 and currently headquartered in Trenton, IL. As of December 31, 2017, the bank held equity of $10.7 million on $95.4 million in assets.

With 17 full-time employees in 2 offices in IL, the bank holds loans and leases worth $84.2 million, including real estate loans of $83.0 million. U.S. bank customers currently have $76.9 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Tempo Bank, A Federal Savings Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a look at 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 a key measurement of a bank's financial strength. It works as a bulwark against losses and as protection for depositors when a bank is struggling financially. From a safety and soundness perspective, the more capital, the better.

Tempo Bank, A Federal Savings Bank exceeded the national average of 13.13 points on our test to measure the adequacy of a bank's capital, scoring 14 out of a possible 30 points.

A bank's Tier 1 capital ratio is an essential measure of this buffer. Tempo Bank, A Federal Savings Bank's Tier 1 capital ratio was 22.04 percent, exceeding the 6 percent level considered adequate by regulators, but lower than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather financial headwinds.

Overall, Tempo Bank, A Federal Savings Bank held equity amounting to 11.18 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to try to understand how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by problem assets, such as unpaid mortgages.

Having extensive holdings of these kinds of assets means a bank may eventually have to use capital to cover losses, cutting down on its equity cushion. 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.

On Bankrate's asset quality test, Tempo Bank, A Federal Savings Bank scored 40 out of a possible 40 points, beating the national average of 37.49 points.

A helpful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.06 percent of Tempo Bank, A Federal Savings 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 troubled assets . That reserve's size can be a useful 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 Tempo Bank, A Federal Savings Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its long-term survivability. A bank can retain its earnings, increasing its capital buffer, or use them to deal with problematic loans, likely making the bank better prepared to withstand economic shocks. Losses, on the other hand, reduce a bank's ability to do those things.

Tempo Bank, A Federal Savings Bank did below-average on Bankrate's earnings test, achieving a score of 6 out of a possible 30.

Return on equity, calculated by dividing net income (profit, basically) by total equity, is one important way to measure a bank's earnings. Tempo Bank, A Federal Savings Bank's most recent annualized quarterly return on equity was 1.99 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $218,000 on total equity of $10.7 million. The bank experienced an annualized return on average assets, or ROA, of 0.23 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.