Safe and Sound

LincolnWay Community Bank

New Lenox, IL
5
Star Rating
LincolnWay Community Bank is an FDIC-insured bank started in 2005 and currently based in New Lenox, IL. As of December 31, 2017, the bank held equity of $22.6 million on $187.6 million in assets.

Thanks to the work of 36 full-time employees in 3 offices in IL, the bank has amassed loans and leases worth $148.6 million, $137.9 million of which are for real estate. The bank currently holds $163.1 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, LincolnWay Community Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's an analysis of how the bank did on the three important criteria Bankrate used to evaluate U.S. banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

Capital is an important measurement of a bank's financial fortitude. It works as a buffer against losses and affords protection for depositors when a bank is struggling financially. From a safety and soundness perspective, more capital is better.

LincolnWay Community Bank scored 16 out of a possible 30 points on our test to measure the adequacy of a bank's capital, above the national average of 13.13.

A bank's Tier 1 capital ratio is a commonly used measure of this buffer. LincolnWay Community Bank's Tier 1 capital ratio was 14.05 percent, above the 6 percent level regulators consider adequate, but below the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to economic downturns.

Overall, LincolnWay Community Bank held equity amounting to 12.02 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

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

A bank with lots of these types of assets may eventually be required to use capital to absorb losses, reducing 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 depressed earnings and potentially more risk of a failure in the future.

On Bankrate's test of asset quality, LincolnWay Community Bank scored 36 out of a possible 40 points, falling short of the national average of 37.49 points.

A handy indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 1.05 percent of LincolnWay Community Bank's loans were noncurrent -- in other words, 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 deal with problem 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 handy indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on LincolnWay Community Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance has an effect on its long-term survivability. Earnings can be retained by the bank, expanding its capital buffer, or be used to deal with problematic loans, potentially making the bank more resilient in times of trouble. Obviously, banks that are losing money have less ability to do those things.

LincolnWay Community Bank received above-average marks on Bankrate's test of earnings, achieving a score of 20 out of a possible 30.

Return on equity, calculated by dividing net income (profit, basically) by the total amount of equity, is one key measure of a bank's earnings. LincolnWay Community Bank's most recent annualized quarterly return on equity was 11.15 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $2.4 million on total equity of $22.6 million. The bank had an annualized return on average assets, or ROA, of 1.25 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.