Safe and Sound

The First Trust and Savings Bank of Watseka, Illinois

Watseka, IL
5
Star Rating
Watseka, IL-based The First Trust and Savings Bank of Watseka, Illinois is an FDIC-insured bank founded in 1909. The bank has equity of $35.8 million on assets of $243.7 million, according to December 31, 2017, regulatory filings.

Thanks to the efforts of 32 full-time employees in 2 offices in IL, the bank has amassed loans and leases worth $120.8 million, including real estate loans of $64.0 million. U.S. bank customers currently have $207.6 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, The First Trust and Savings Bank of Watseka, Illinois exhibited a superior condition, earning a full 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 on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a buffer against losses and as protection for depositors when a bank is experiencing financial instability. It follows then that when it comes to measuring an an institution's financial fortitude, capital is useful. When it comes to safety and soundness, the more capital, the better.

On our test to measure capital adequacy, The First Trust and Savings Bank of Watseka, Illinois achieved a score of 20 out of a possible 30 points, better than the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. The First Trust and Savings Bank of Watseka, Illinois's Tier 1 capital ratio was 25.12 percent, higher than the 6 percent level regulators consider adequate, but lower than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to financial headwinds.

Overall, The First Trust and Savings Bank of Watseka, Illinois held equity amounting to 14.69 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to determine the effect of problem assets, such as past-due mortgages, on the bank's loan loss reserves and overall capitalization.

Having extensive holdings of these types of assets suggests a bank may have to use capital to absorb losses, decreasing its equity buffer. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, resulting in reduced earnings and potentially more risk of a future failure.

On Bankrate's asset quality test, The First Trust and Savings Bank of Watseka, Illinois scored 40 out of a possible 40 points, beating the national average of 37.49 points.

The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of December 31, 2017, 0.37 percent of The First Trust and Savings Bank of Watseka, Illinois'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 maintain a reserve to deal with troubled assets known as an "allowance for loan and lease losses." Comparing the reserve's size to the total amount of at-risk loans can be a helpful indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on The First Trust and Savings Bank of Watseka, Illinois'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 can be retained by the bank, increasing its capital buffer, or be used to deal with problematic loans, potentially making the bank better able to withstand financial trouble. Losses, on the other hand, take away from a bank's ability to do those things.

The First Trust and Savings Bank of Watseka, Illinois scored 18 out of a possible 30 on Bankrate's earnings test, beating out the national average of 15.12.

One widely used way to measure a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by the total amount of equity. The First Trust and Savings Bank of Watseka, Illinois's most recent annualized quarterly return on equity was 8.68 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $3.1 million on total equity of $35.8 million. The bank experienced an annualized return on average assets, or ROA, of 1.26 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above 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.