Safe and Sound

The First National Bank of Lacon

Lacon, IL
4
Star Rating
Started in 1864, The First National Bank of Lacon is an FDIC-insured bank headquartered in Lacon, IL. The bank has equity of $5.4 million on assets of $58.0 million, according to December 31, 2017, regulatory filings.

With 14 full-time employees, the bank holds loans and leases worth $41.8 million, including real estate loans of $27.3 million. U.S. bank customers currently have $52.6 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, The First National Bank of Lacon exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a look at how the bank did on the three key criteria Bankrate used to score U.S. banks.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial strength, capital is useful. It works as a bulwark against losses and as protection for depositors during times of economic instability for the bank. When looking at safety and soundness, the higher the capital, the better.

The First National Bank of Lacon received a score of 10 out of a possible 30 points on our test to measure capital adequacy, coming in below the national average of 13.13.

A bank's Tier 1 capital ratio is a widely followed measure of this buffer. The First National Bank of Lacon's Tier 1 capital ratio was 13.11 percent, higher than the 6 percent level considered adequate by regulators, but lower than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather financial challenges.

Overall, The First National Bank of Lacon held equity amounting to 9.30 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 loan loss reserves and overall capitalization could be affected by troubled assets, such as unpaid mortgages.

Having large numbers of these types of assets could eventually force a bank to use capital to cover losses, cutting down on its equity cushion. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, pushing down earnings and elevating the risk of a future failure.

The First National Bank of Lacon beat out the national average of 37.49 on Bankrate's test of asset quality, racking up 40 out of a possible 40 points .

The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of December 31, 2017, none of The First National Bank of Lacon'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 maintain a reserve known as an "allowance for loan and lease losses" to deal with problem assets . How large that reserve is can be a helpful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on The First National Bank of Lacon's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its safety and soundness. A bank can retain its earnings, boosting its capital buffer, or use them to deal with 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.

The First National Bank of Lacon did above-average on Bankrate's earnings test, achieving a score of 18 out of a possible 30.

One key way to measure a bank's earnings is return on equity, calculated by dividing net income (profit, essentially) by total equity. The First National Bank of Lacon's most recent annualized quarterly return on equity was 8.69 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $467,000 on total equity of $5.4 million. The bank experienced an annualized return on average assets, or ROA, of 0.74 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.