Safe and Sound

First Southern Bank

Marion, IL
5
Star Rating
Marion, IL-based First Southern Bank is an FDIC-insured bank started in 1937. The bank holds equity of $93.2 million on $677.3 million in assets, according to December 31, 2017, regulatory filings.

With 154 full-time employees in 16 offices in IL, the bank holds loans and leases worth $478.3 million, including real estate loans of $379.0 million. U.S. bank customers currently have $527.5 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, First Southern Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a look at how the bank did on the three major criteria Bankrate used to evaluate American banks on safety and soundness.

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 depositors during times of financial trouble for the bank. Therefore, when it comes to measuring an a bank's financial strength, capital is key. When looking at safety and soundness, more capital is better.

First Southern Bank scored above the national average of 13.13 points on our test to measure capital adequacy, racking up 16 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. First Southern Bank's Tier 1 capital ratio was 17.11 percent, above the 6 percent level considered adequate by regulators, but under the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to financial challenges.

Overall, First Southern Bank held equity amounting to 13.77 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to estimate the impact 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 may eventually be forced to use capital to absorb losses, shrinking its cushion of equity. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning money, decreasing earnings and increasing the chances of a failure in the future.

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

The percentage of problem assets a bank holds compared to its total assets is a useful indicator of asset quality.As of December 31, 2017, 0.91 percent of First Southern Bank'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 keep a reserve to handle troubled assets known as an "allowance for loan and lease losses." The size of that reserve can be a helpful 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 Southern Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its long-term survivability. Earnings can be retained by the bank, expanding its capital buffer, or be used to deal with problematic loans, likely making the bank better prepared to withstand financial trouble. Banks that are losing money, however, have less ability to do those things.

First Southern Bank beat the national average on Bankrate's earnings test, achieving a score of 16 out of a possible 30.

Return on equity, calculated by dividing net income (essentially, profit) by total equity, is one key measure of a bank's earnings. The most recent annualized quarterly return on equity for First Southern Bank was 7.83 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $7.1 million on total equity of $93.2 million. The bank reported an annualized return on average assets, or ROA, of 1.06 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.