Safe and Sound

Bank of Chestnut

Chestnut, IL
2
Star Rating
Started in 1902, Bank of Chestnut is an FDIC-insured bank based in Chestnut, IL. Regulatory filings show the bank having equity of $1.7 million on assets of $18.5 million, as of December 31, 2017.

Thanks to the work of 5 full-time employees, the bank currently holds loans and leases worth $14.6 million, including real estate loans of $9.7 million. U.S. bank customers currently have $16.2 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Bank of Chestnut exhibited a below-average condition, earning 2 out of 5 stars for safety and soundness. Here's a breakdown of how the bank did on the three major criteria Bankrate used to evaluate U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a bulwark against losses and as protection for account holders during times of financial instability for the bank. It follows then that when it comes to measuring an an institution's financial stability, capital is valuable. From a safety and soundness perspective, more capital is preferred.

Bank of Chestnut received a score of 10 out of a possible 30 points on our test to measure the adequacy of a bank's capital, failing to reach the national average of 13.13.

A bank's Tier 1 capital ratio is an essential measure of this buffer. Bank of Chestnut's Tier 1 capital ratio was 12.85 percent, higher than the 6 percent level considered adequate by regulators, but under the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to economic difficulties.

Overall, Bank of Chestnut held equity amounting to 9.16 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to determine the effect of troubled assets, such as past-due loans, on the bank's capitalization and allocated loan loss reserves.

Having lots of these kinds of assets means a bank could have to use capital to cover losses, diminishing its equity cushion. Many of those assets are also likely to be in non-accrual status and no longer earning money, pushing down earnings and elevating the chances of a failure in the future.

Bank of Chestnut scored 32 out of a possible 40 points on Bankrate's asset quality test, below the national average of 37.49.

A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 1.60 percent of Bank of Chestnut'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 problem 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. Unfortunately, the FDIC did not provide information on Bank of Chestnut's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability affects its safety and soundness. Earnings may be retained by the bank, giving a boost to its capital buffer, or be used to address problematic loans, likely making the bank more resilient in times of trouble. Obviously, banks that are losing money have less ability to do those things.

Bank of Chestnut scored 0 out of a possible 30 on Bankrate's test of earnings, failing to reach the national average of 15.12.

Return on equity, calculated by dividing net income (essentially, profit) by the total amount of equity, is one important measure of a bank's earnings. The most recent annualized quarterly return on equity for Bank of Chestnut was -5.10 percent, below the national average of 8.10 percent.

The bank reported net income of $-92,000 on total equity of $1.7 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of -0.51 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.