Safe and Sound

First Community Bank and Trust

Beecher, IL
3
Star Rating
Beecher, IL-based First Community Bank and Trust is an FDIC-insured bank started in 1916. As of December 31, 2017, the bank held equity of $17.1 million on $146.8 million in assets.

U.S. bank customers have $122.8 million on deposit at 2 offices in IL run by 30 full-time employees. With that footprint, the bank currently holds loans and leases worth $72.7 million, including $50.1 million worth of real estate loans.

Overall, Bankrate believes that, as of December 31, 2017, First Community Bank and Trust exhibited a generally satisfactory condition, earning 3 out of 5 stars for safety and soundness. Keep reading for a look at how the bank did on the three major criteria Bankrate used to score American banks.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a buffer against losses and affords protection for account holders when a bank is experiencing economic instability. It follows then that when it comes to measuring an a bank's financial strength, capital is useful. From a safety and soundness perspective, the higher the capital, the better.

On our test to measure the adequacy of a bank's capital, First Community Bank and Trust scored 14 out of a possible 30 points, beating out the national average of 13.13.

A bank's Tier 1 capital ratio is an essential measure of this buffer. First Community Bank and Trust's Tier 1 capital ratio was 17.30 percent, above the 6 percent level considered adequate by regulators, but lower than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather financial challenges.

Overall, First Community Bank and Trust held equity amounting to 11.62 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 loans, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

A bank with large numbers of these kinds of assets may eventually have to use capital to absorb losses, reducing its equity buffer. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, resulting in lower earnings and potentially more risk of a future failure.

On Bankrate's asset quality test, First Community Bank and Trust scored 28 out of a possible 40 points, below 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, 1.99 percent of First Community Bank and Trust's loans were noncurrent, meaning 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." The size of that reserve 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 First Community Bank and Trust's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance has an effect on its safety and soundness. Earnings may be retained by the bank, expanding its capital cushion, or be used to deal with problematic loans, likely making the bank better prepared to withstand economic shocks. However, banks that are losing money have less ability to do those things.

First Community Bank and Trust scored 6 out of a possible 30 on Bankrate's test of earnings, lower than the national average of 15.12.

One widely used measure of a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by total equity. First Community Bank and Trust's most recent annualized quarterly return on equity was 2.51 percent, below the national average of 8.10 percent.

The bank earned net income of $428,000 on total equity of $17.1 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 0.29 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.