Safe and Sound

Fairview State Banking Company

Fairview, IL
5
Star Rating
Started in 1915, Fairview State Banking Company is an FDIC-insured bank based in Fairview, IL. As of December 31, 2017, the bank held equity of $3.6 million on $29.4 million in assets.

With 5 full-time employees, the bank has amassed loans and leases worth $20.4 million, including real estate loans of $13.2 million. U.S. bank customers currently have $25.6 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Fairview State Banking Company exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a breakdown of how the bank fared on the three key 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 acts as a bulwark against losses and provides protection for account holders when a bank is experiencing financial instability. It follows then that when it comes to measuring an an institution's financial stability, capital is key. From a safety and soundness perspective, the more capital, the better.

Fairview State Banking Company racked up 16 out of a possible 30 points on our test to measure the adequacy of a bank's capital, better than the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Fairview State Banking Company's Tier 1 capital ratio was 17.25 percent, higher than 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 weather economic difficulties.

Overall, Fairview State Banking Company held equity amounting to 12.37 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to try to understand how the bank's loan loss reserves and overall capitalization could be affected by problem assets, such as past-due mortgages.

A bank with large numbers of these kinds of assets could eventually have to use capital to absorb losses, decreasing its equity buffer. 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, pushing down earnings and increasing the risk of a failure in the future.

Fairview State Banking Company scored 40 out of a possible 40 points on Bankrate's test of asset quality, beating out the national average of 37.49.

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, 0.68 percent of Fairview State Banking Company'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 maintain a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . That reserve's size can be a widely used indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on Fairview State Banking Company'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, giving a boost to its capital cushion, or be used to address problematic loans, potentially making the bank more resilient in times of trouble. Losses, on the other hand, lessen a bank's ability to do those things.

On Bankrate's earnings test, Fairview State Banking Company scored 14 out of a possible 30, coming in below the national average of 15.12.

One important way to measure a bank's earnings is return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity. Fairview State Banking Company's most recent annualized quarterly return on equity was 7.18 percent, below the national average of 8.10 percent.

The bank recorded net income of $254,000 on total equity of $3.6 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 0.87 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.