Safe and Sound

The Fairfield National Bank

Fairfield, IL
5
Star Rating
The Fairfield National Bank is an FDIC-insured bank started in 1903 and currently headquartered in Fairfield, IL. Regulatory filings show the bank having equity of $60.2 million on $555.5 million in assets, as of December 31, 2017.

Thanks to the work of 56 full-time employees in 3 offices in IL, the bank holds loans and leases worth $326.9 million, including $145.1 million worth of real estate loans. The bank currently holds $354.1 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, The Fairfield National Bank exhibited a superior condition, earning a full 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 on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial fortitude, capital is important. It works as a buffer against losses and provides protection for accountholders during periods of financial trouble for the bank. From a safety and soundness perspective, the more capital, the better.

The Fairfield National Bank came in below the national average of 13.13 on our test to measure the adequacy of a bank's capital, racking up 10 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. The Fairfield National Bank's Tier 1 capital ratio was 20.45 percent, above the 6 percent level considered adequate by regulators, but below the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather financial downturns.

Overall, The Fairfield National Bank held equity amounting to 10.83 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to try to understand how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by problem assets, such as unpaid loans.

Having large numbers of these kinds of assets means a bank may have to use capital to cover losses, shrinking its equity buffer. Many of those assets are also likely to be in non-accrual status and no longer earning money, resulting in depressed earnings and potentially more risk of a future failure.

The Fairfield National Bank scored 40 out of a possible 40 points on Bankrate's asset quality test, exceeding the national average of 37.49.

A helpful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 1.11 percent of The Fairfield National Bank'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 keep a reserve to handle troubled assets known as an "allowance for loan and lease losses." Comparing the reserve's size to the total amount of problematic loans can be a widely used indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on The Fairfield National Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money has an effect on its safety and soundness. A bank can retain its earnings, increasing its capital cushion, or use them to deal with problematic loans, likely making the bank better able to withstand financial shocks. Banks that are losing money, however, are less able to do those things.

The Fairfield National Bank scored 20 out of a possible 30 on Bankrate's earnings test, above the national average of 15.12.

Return on equity, calculated by dividing net income (profit, basically) by total equity, is one important measure of a bank's earnings. The Fairfield National Bank's most recent annualized quarterly return on equity was 10.37 percent, above the national average of 8.10 percent.

The bank recorded net income of $6.0 million on total equity of $60.2 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 1.16 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.