Safe and Sound

The Bank of Bourbonnais

Bourbonnais, IL
4
Star Rating
The Bank of Bourbonnais is an FDIC-insured bank founded in 1974 and currently headquartered in Bourbonnais, IL. Regulatory filings show the bank having equity of $8.5 million on assets of $72.1 million, as of December 31, 2017.

Thanks to the work of 11 full-time employees, the bank currently holds loans and leases worth $45.0 million, including $38.7 million worth of real estate loans. U.S. bank customers currently have $61.1 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, The Bank of Bourbonnais exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a breakdown of how the bank did on the three important criteria Bankrate used to score U.S. banks.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a cushion against losses and affords protection for account holders during times of economic trouble for the bank. Therefore, when it comes to measuring an an institution's financial resilience, capital is useful. From a safety and soundness perspective, the higher the capital, the better.

The Bank of Bourbonnais beat out the national average of 13.13 points on our test to measure capital adequacy, scoring 14 out of a possible 30 points.

One widely used measure of this buffer is a bank's Tier 1 capital ratio. The Bank of Bourbonnais's Tier 1 capital ratio was 19.98 percent, above the 6 percent level considered adequate by regulators, but less than the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to financial challenges.

Overall, The Bank of Bourbonnais held equity amounting to 11.81 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to estimate the impact of troubled assets, such as unpaid mortgages, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

Having a large number of these kinds of assets may eventually force a bank to use capital to cover losses, shrinking its cushion of equity. It also means that there are likely to be many assets that are in non-accrual status and no longer earning interest for the bank, reducing earnings and increasing the risk of a future failure.

On Bankrate's asset quality test, The Bank of Bourbonnais scored 40 out of a possible 40 points, above the national average of 37.49 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, none of The Bank of Bourbonnais'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 . The size of that reserve can be a handy indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on The Bank of Bourbonnais's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability has an effect on its safety and soundness. Earnings can be retained by the bank, boosting its capital cushion, or be used to deal with problematic loans, potentially making the bank more resilient in tough times. Losses, on the other hand, diminish a bank's ability to do those things.

On Bankrate's test of earnings, The Bank of Bourbonnais scored 12 out of a possible 30, less than the national average of 15.12.

Return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity, is one key measure of a bank's earnings. The most recent annualized quarterly return on equity for The Bank of Bourbonnais was 5.47 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $457,000 on total equity of $8.5 million. The bank had an annualized return on average assets, or ROA, of 0.61 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.