Safe and Sound

First State Bank of Forrest

Forrest, IL
3
Star Rating
First State Bank of Forrest is an FDIC-insured bank founded in 1914 and currently headquartered in Forrest, IL. As of December 31, 2017, the bank held equity of $14.7 million on assets of $190.5 million.

U.S. bank customers have $154.6 million on deposit at 6 offices in IL run by 38 full-time employees. With that footprint, the bank currently holds loans and leases worth $162.0 million, including real estate loans of $108.0 million.

Overall, Bankrate believes that, as of December 31, 2017, First State Bank of Forrest exhibited a generally satisfactory condition, earning 3 out of 5 stars for safety and soundness. Keep reading for a look at how the bank fared on the three important criteria Bankrate used to evaluate U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a cushion against losses and provides protection for depositors when a bank is struggling financially. It follows then that a bank's level of capital is a useful measurement of a bank's financial strength. When it comes to safety and soundness, the more capital, the better.

First State Bank of Forrest scored below the national average of 13.13 on our test to measure capital adequacy, scoring 6 out of a possible 30 points.

One widely followed measure of this buffer is a bank's Tier 1 capital ratio. First State Bank of Forrest's Tier 1 capital ratio was 10.75 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 financial difficulties.

Overall, First State Bank of Forrest held equity amounting to 7.73 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 effect of troubled assets, such as unpaid loans, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

A bank with lots of these kinds of assets may eventually be forced to use capital to cover losses, reducing 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 money, decreasing earnings and increasing the risk of a future failure.

First State Bank of Forrest scored below the national average of 37.49 on Bankrate's asset quality test, racking up 24 out of a possible 40 points .

A handy indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 3.10 percent of First State Bank of Forrest'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 keep a reserve known as an "allowance for loan and lease losses" to deal with problem assets . Comparing how large that reserve is to the total amount of at-risk loans can be a widely used indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on First State Bank of Forrest's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its long-term survivability. Earnings can be retained by the bank, expanding its capital buffer, or be used to address problematic loans, potentially making the bank better able to withstand economic shocks. Losses, on the other hand, take away from a bank's ability to do those things.

On Bankrate's test of earnings, First State Bank of Forrest scored 20 out of a possible 30, exceeding the national average of 15.12.

One widely used measure of a bank's earnings is return on equity, or net income (essentially profit) divided by total equity. First State Bank of Forrest's most recent annualized quarterly return on equity was 11.56 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $1.7 million on total equity of $14.7 million. The bank reported an annualized return on average assets, or ROA, of 0.92 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.