Safe and Sound

Iroquois Farmers State Bank

Iroquois, IL
4
Star Rating
Iroquois Farmers State Bank is an Iroquois, IL-based, FDIC-insured bank that opened its doors in 1919. As of December 31, 2017, the bank had equity of $9.8 million on assets of $105.1 million.

U.S. bank customers have $94.1 million on deposit at 6 offices in IL run by 27 full-time employees. With that footprint, the bank has amassed loans and leases worth $62.3 million, $36.5 million of which are for real estate.

Overall, Bankrate believes that, as of December 31, 2017, Iroquois Farmers State Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a breakdown of how the bank fared on the three important criteria Bankrate used to grade U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a buffer against losses and provides protection for depositors when a bank is experiencing economic instability. It follows then that a bank's level of capital is an important measurement of a bank's financial strength. When looking at safety and soundness, the more capital, the better.

On our test to measure capital adequacy, Iroquois Farmers State Bank received a score of 10 out of a possible 30 points, below the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Iroquois Farmers State Bank's Tier 1 capital ratio was 14.34 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 stand up to financial difficulties.

Overall, Iroquois Farmers State Bank held equity amounting to 9.32 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to estimate the impact of troubled assets, such as unpaid mortgages, on the bank's capitalization and allocated loan loss reserves.

A bank with a large number of these types of assets may eventually have to use capital to cover losses, reducing its equity cushion. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, resulting in reduced earnings and potentially more risk of a failure in the future.

Iroquois Farmers State Bank came in below the national average of 37.49 on Bankrate's test of asset quality, 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, 1.02 percent of Iroquois Farmers State 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 to handle problem assets known as an "allowance for loan and lease losses." Comparing the reserve's size to the total amount of problem loans can be a helpful indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Iroquois Farmers State Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its long-term survivability. A bank can retain its earnings, increasing its capital buffer, or use them to deal with problematic loans, potentially making the bank better prepared to withstand economic trouble. Conversely, losses take away from a bank's ability to do those things.

Iroquois Farmers State Bank scored 16 out of a possible 30 on Bankrate's earnings test, beating out the national average of 15.12.

Return on equity, calculated by dividing net income (profit, basically) by the total amount of equity, is one widely used measure of a bank's earnings. Iroquois Farmers State Bank's most recent annualized quarterly return on equity was 7.04 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $699,000 on total equity of $9.8 million. The bank reported an annualized return on average assets, or ROA, of 0.66 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.