Safe and Sound

First State Bank of Olmsted

Olmsted, IL
4
Star Rating
Olmsted, IL-based First State Bank of Olmsted is an FDIC-insured bank started in 1921. As of December 31, 2017, the bank held equity of $5.9 million on assets of $49.6 million.

Thanks to the efforts of 16 full-time employees in 3 offices in IL, the bank has amassed loans and leases worth $32.7 million, $24.8 million of which are for real estate. U.S. bank customers currently have $43.4 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, First State Bank of Olmsted 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 major criteria Bankrate used to score American banks.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial resilience, capital is essential. It acts as a cushion against losses and provides protection for accountholders when a bank is experiencing economic instability. When it comes to safety and soundness, more capital is better.

First State Bank of Olmsted scored above the national average of 13.13 points on our test to measure capital adequacy, achieving a score of 14 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. First State Bank of Olmsted's Tier 1 capital ratio was 19.02 percent, above the 6 percent level considered adequate by regulators, but below the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to financial difficulties.

Overall, First State Bank of Olmsted held equity amounting to 11.89 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to estimate how the bank's capitalization and allocated loan loss reserves could be affected by troubled assets, such as past-due loans.

Having extensive holdings of these kinds of assets may eventually require a bank to use capital to cover losses, shrinking its cushion of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning interest for the bank, decreasing earnings and elevating the chances of a future failure.

First State Bank of Olmsted finished below the national average of 37.49 on Bankrate's asset quality test, racking up 36 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, 1.71 percent of First State Bank of Olmsted's loans were noncurrent -- in other words, 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 known as an "allowance for loan and lease losses" to deal with troubled 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 Olmsted's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its long-term survivability. Earnings may be retained by the bank, expanding its capital cushion, or be used to deal with problematic loans, potentially making the bank more resilient in times of trouble. Losses, on the other hand, reduce a bank's ability to do those things.

First State Bank of Olmsted outperformed the average on Bankrate's earnings test, achieving a score of 16 out of a possible 30.

Return on equity, calculated by dividing net income (profit, basically) by the total amount of equity, is one key measure of a bank's earnings. First State Bank of Olmsted's most recent annualized quarterly return on equity was 7.27 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $419,000 on total equity of $5.9 million. The bank had 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.