Safe and Sound

Flora Bank & Trust

Flora, IL
4
Star Rating
Flora Bank & Trust is a Flora, IL-based, FDIC-insured bank started in 1978. The bank holds equity of $8.1 million on $68.9 million in assets, according to December 31, 2017, regulatory filings.

Thanks to the work of 23 full-time employees in 5 offices in IL, the bank has amassed loans and leases worth $45.1 million, including $26.4 million worth of real estate loans. U.S. bank customers currently have $60.7 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Flora Bank & Trust 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 important criteria Bankrate used to grade American banks.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial stability, capital is valuable. It works as a bulwark against losses and affords protection for accountholders when a bank is experiencing financial instability. When looking at safety and soundness, the higher the capital, the better.

Flora Bank & Trust scored above the national average of 13.13 points on our test to measure capital adequacy, racking up 14 out of a possible 30 points.

One widely used measure of this buffer is a bank's Tier 1 capital ratio. Flora Bank & Trust's Tier 1 capital ratio was 18.16 percent, above the 6 percent level regulators consider adequate, but under the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather financial difficulties.

Overall, Flora Bank & Trust held equity amounting to 11.73 percent of its assets, which was lower than 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 unpaid mortgages.

A bank with lots of these types of assets could eventually be required to use capital to absorb losses, shrinking its equity buffer. Many of those assets are also likely to be in non-accrual status and no longer earning money, reducing earnings and increasing the risk of a future failure.

On Bankrate's test of asset quality, Flora Bank & Trust scored 40 out of a possible 40 points, beating the national average of 37.49 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, 0.75 percent of Flora Bank & Trust's loans were noncurrent, meaning 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 known as an "allowance for loan and lease losses" to deal with problem assets . That reserve's size 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 Flora Bank & Trust's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance affects its safety and soundness. Earnings may 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. Conversely, losses take away from a bank's ability to do those things.

Flora Bank & Trust did below-average on Bankrate's earnings test, achieving a score of 10 out of a possible 30.

One widely used way to measure a bank's earnings is return on equity, calculated by dividing net income (profit, essentially) by total equity. Flora Bank & Trust's most recent annualized quarterly return on equity was 5.08 percent, below the national average of 8.10 percent.

The bank recorded net income of $403,000 on total equity of $8.1 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 0.59 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.