Safe and Sound

Lake Forest Bank and Trust Company

Lake Forest, IL
5
Star Rating
Lake Forest, IL-based Lake Forest Bank and Trust Company is an FDIC-insured bank started in 1986. As of June 30, 2017, the bank held equity of $377.1 million on assets of $3.45 billion.

U.S. bank customers have $2.78 billion on deposit at 8 offices in IL run by 423 full-time employees. With that footprint, the bank currently holds loans and leases worth $2.58 billion, including real estate loans of $712.5 million.

Overall, Bankrate believes that, as of June 30, 2017, Lake Forest Bank and Trust Company exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for an analysis of how the bank did on the three major criteria Bankrate used to grade American banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a buffer against losses and provides protection for depositors when a bank is experiencing economic trouble. It follows then that when it comes to measuring an an institution's financial fortitude, capital is key. When it comes to safety and soundness, more capital is preferred.
Lake Forest Bank and Trust Company fell short of the national average of 13.38 on our test to measure capital adequacy, racking up 12 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Lake Forest Bank and Trust Company's Tier 1 capital ratio was 11.30 percent, above the 6 percent level considered adequate by regulators, but below the national average of 25.16 percent. A higher capital ratio means the bank will be better able to stand up to economic downturns.

Overall, Lake Forest Bank and Trust Company held equity amounting to 10.94 percent of its assets, which was lower than the national average of 12.10 percent.

Asset Quality Score

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

Having lots of these types of assets means a bank may have to use capital to absorb losses, decreasing its cushion of equity. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning interest for the bank, resulting in reduced earnings and potentially more risk of a future failure.

On Bankrate's asset quality test, Lake Forest Bank and Trust Company scored 40 out of a possible 40 points, better than the national average of 37.62 points.

The percentage of problem assets a bank holds compared to its total assets is a handy indicator of asset quality.As of June 30, 2017, 0.44 percent of Lake Forest Bank and Trust Company'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 1.04 percent.

Banks maintain a reserve to deal with troubled assets known as an "allowance for loan and lease losses." That reserve's size can be a helpful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on Lake Forest Bank and Trust Company's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its safety and soundness. Earnings can be retained by the bank, increasing its capital buffer, or be used to address problematic loans, potentially making the bank better prepared to withstand financial trouble. Losses, on the other hand, reduce a bank's ability to do those things.

Lake Forest Bank and Trust Company beat the national average on Bankrate's earnings test, achieving a score of 26 out of a possible 30.

One important measure of a bank's earnings is return on equity, calculated by dividing net income (profit, basically) by the total amount of equity. Lake Forest Bank and Trust Company's most recent annualized quarterly return on equity was 16.33 percent, above the national average of 9.28 percent.

The bank reported net income of $30.3 million on total equity of $377.1 million for the twelve months ended June 30, 2017. The bank reported an annualized return on average assets, or ROA, of 1.82 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above the average for U.S. banks of 1.14 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.