Safe and Sound

Flora Savings Bank

Flora, IL
4
Star Rating
Flora Savings Bank is a Flora, IL-based, FDIC-insured bank started in 1904. The bank has equity of $3.5 million on $30.2 million in assets, according to December 31, 2017, regulatory filings.

With 6 full-time employees, the bank currently holds loans and leases worth $19.8 million, including real estate loans of $14.3 million. U.S. bank customers currently have $26.6 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Flora Savings Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's an analysis of how the bank fared on the three important criteria Bankrate used to grade American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital is an important measurement of an institution's financial fortitude. It works as a buffer against losses and as protection for accountholders when a bank is experiencing financial instability. When it comes to safety and soundness, more capital is preferred.

Flora Savings Bank racked up 14 out of a possible 30 points on our test to measure capital adequacy, beating out the national average of 13.13.

A bank's Tier 1 capital ratio is an essential measure of this buffer. Flora Savings Bank's Tier 1 capital ratio was 20.15 percent, higher than the 6 percent level considered adequate by regulators, but less than the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to economic downturns.

Overall, Flora Savings Bank held equity amounting to 11.70 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test is intended to try to understand how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by troubled assets, such as unpaid mortgages.

A bank with a large number of these types of assets could eventually be required to use capital to cover losses, cutting down on its cushion of equity. Many of those assets are also likely to be in non-accrual status and no longer earning money, resulting in depressed earnings and potentially more risk of a failure in the future.

On Bankrate's test of asset quality, Flora Savings Bank scored 36 out of a possible 40 points, lower than 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, 1.18 percent of Flora Savings Bank'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 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 problem assets. Unfortunately, the FDIC did not provide information on Flora Savings Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its safety and soundness. Earnings may be retained by the bank, boosting its capital cushion, or be used to deal with problematic loans, likely making the bank better able to withstand financial shocks. Losses, on the other hand, diminish a bank's ability to do those things.

Flora Savings Bank scored 8 out of a possible 30 on Bankrate's earnings test, less than the national average of 15.12.

One important measure of a bank's earnings is return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity. The most recent annualized quarterly return on equity for Flora Savings Bank was 4.01 percent, below the national average of 8.10 percent.

The bank reported net income of $138,000 on total equity of $3.5 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.46 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.