Safe and Sound

Litchfield Bancorp

Litchfield, CT
3
Star Rating
Litchfield Bancorp is a Litchfield, CT-based, FDIC-insured bank started in 1850. Regulatory filings show the bank having equity of $19.3 million on assets of $247.5 million, as of December 31, 2017.

U.S. bank customers have $202.3 million on deposit at 6 offices in CT run by 51 full-time employees. With that footprint, the bank currently holds loans and leases worth $185.8 million, including real estate loans of $170.2 million.

Overall, Bankrate believes that, as of December 31, 2017, Litchfield Bancorp exhibited a generally satisfactory condition, earning 3 out of 5 stars for safety and soundness. Here's a look at how the bank fared on the three key criteria Bankrate used to evaluate American banks.

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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 as protection for accountholders when a bank is struggling financially. When looking at safety and soundness, the more capital, the better.

Litchfield Bancorp received a score of 6 out of a possible 30 points on our test to measure the adequacy of a bank's capital, less than the national average of 13.13.

A bank's Tier 1 capital ratio is a commonly used measure of this buffer. Litchfield Bancorp's Tier 1 capital ratio was 12.23 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 weather economic headwinds.

Overall, Litchfield Bancorp held equity amounting to 7.81 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 loan loss reserves and overall capitalization could be affected by troubled assets, such as unpaid mortgages.

A bank with a large number of these kinds of assets may eventually be required to use capital to cover losses, shrinking 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 money, resulting in diminished earnings and potentially more risk of a failure in the future.

Litchfield Bancorp scored 40 out of a possible 40 points on Bankrate's test of asset quality, better than 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, 0.94 percent of Litchfield Bancorp'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 problem assets . How large that reserve is can be a widely used indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on Litchfield Bancorp's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money affects its long-term survivability. Earnings may be retained by the bank, giving a boost to its capital cushion, or be used to deal with problematic loans, likely making the bank better able to withstand economic shocks. Losses, on the other hand, diminish a bank's ability to do those things.

On Bankrate's earnings test, Litchfield Bancorp scored 2 out of a possible 30, lower than the national average of 15.12.

One key way to measure a bank's earnings is return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity. Litchfield Bancorp's most recent annualized quarterly return on equity was 0.37 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $73,000 on total equity of $19.3 million. The bank reported an annualized return on average assets, or ROA, of 0.03 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.