Safe and Sound

The First National Bank of Carmi

Carmi, IL
4
Star Rating
The First National Bank of Carmi is an FDIC-insured bank founded in 1893 and currently based in Carmi, IL. The bank has equity of $37.6 million on assets of $395.8 million, according to December 31, 2017, regulatory filings.

With 96 full-time employees in 9 offices in multiple states, the bank currently holds loans and leases worth $299.4 million, including real estate loans of $202.2 million. U.S. bank customers currently have $356.9 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, The First National Bank of Carmi exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a breakdown of how the bank did on the three important criteria Bankrate used to score U.S. banks.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a bulwark against losses and as protection for depositors when a bank is struggling financially. It follows then that when it comes to measuring an an institution's financial resilience, capital is valuable. From a safety and soundness perspective, more capital is preferred.

The First National Bank of Carmi came in below the national average of 13.13 on our test to measure the adequacy of a bank's capital, scoring 8 out of a possible 30 points.

One widely followed measure of this buffer is a bank's Tier 1 capital ratio. The First National Bank of Carmi's Tier 1 capital ratio was 10.88 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 suggests the bank will be better able to stand up to economic headwinds.

Overall, The First National Bank of Carmi held equity amounting to 9.51 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 extensive holdings of these kinds of assets may eventually have to use capital to absorb losses, reducing its equity buffer. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, diminishing earnings and elevating the risk of a future failure.

The First National Bank of Carmi beat out the national average of 37.49 on Bankrate's asset quality test, racking up 40 out of a possible 40 points .

The percentage of problem assets a bank holds compared to its total assets is a handy indicator of asset quality.As of December 31, 2017, 0.04 percent of The First National Bank of Carmi's loans were noncurrent -- in other words, 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 troubled assets . That reserve's size can be a useful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problematic loans. The First National Bank of Carmi's loan loss allowance was 4,047.32 percent of its total noncurrent loans, higher than the national average. All things being equal, a higher ratio of loan loss allowance to noncurrent loans is better.

Earnings score

A bank's ability to earn money has an effect on its long-term survivability. A bank can retain its earnings, increasing its capital cushion, or use them to deal with 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.

On Bankrate's earnings test, The First National Bank of Carmi scored 18 out of a possible 30, exceeding the national average of 15.12.

One key way to measure a bank's earnings is return on equity, or net income (profit, basically) divided by total equity. The First National Bank of Carmi's most recent annualized quarterly return on equity was 8.15 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $3.0 million on total equity of $37.6 million. The bank reported an annualized return on average assets, or ROA, of 0.76 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.