Safe and Sound

The First National Bank of Litchfield

Litchfield, IL
5
Star Rating
The First National Bank of Litchfield is an FDIC-insured bank founded in 1860 and currently headquartered in Litchfield, IL. The bank holds equity of $11.6 million on assets of $106.6 million, according to December 31, 2017, regulatory filings.

With 25 full-time employees in 2 offices in IL, the bank has amassed loans and leases worth $81.3 million, including real estate loans of $51.8 million. U.S. bank customers currently have $89.2 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, The First National Bank of Litchfield exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a breakdown of how the bank did on the three key criteria Bankrate used to score American banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a buffer against losses and as protection for account holders when a bank is struggling financially. It follows then that when it comes to measuring an an institution's financial strength, capital is essential. When looking at safety and soundness, more capital is preferred.

The First National Bank of Litchfield received a score of 12 out of a possible 30 points on our test to measure capital adequacy, lower than the national average of 13.13.

A bank's Tier 1 capital ratio is a widely used measure of this buffer. The First National Bank of Litchfield's Tier 1 capital ratio was 13.65 percent, higher than the 6 percent level regulators consider adequate, but less than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to economic difficulties.

Overall, The First National Bank of Litchfield held equity amounting to 10.88 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 problem assets, such as unpaid loans.

Having lots of these kinds of assets could eventually force a bank to use capital to cover losses, reducing its equity cushion. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, resulting in reduced earnings and potentially more risk of a future failure.

On Bankrate's test of asset quality, The First National Bank of Litchfield scored 40 out of a possible 40 points, beating out the national average of 37.49 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, 0.24 percent of The First National Bank of Litchfield's loans were noncurrent, meaning 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 to handle problem assets known as an "allowance for loan and lease losses." The size of that reserve can be a useful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on The First National Bank of Litchfield's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money affects its long-term survivability. A bank can retain its earnings, expanding its capital buffer, or use them to address problematic loans, likely making the bank better prepared to withstand financial trouble. Banks that are losing money, however, have less ability to do those things.

The First National Bank of Litchfield scored 20 out of a possible 30 on Bankrate's earnings test, better than the national average of 15.12.

Return on equity, calculated by dividing net income (essentially, profit) by the total amount of equity, is one key measure of a bank's earnings. The First National Bank of Litchfield's most recent annualized quarterly return on equity was 12.10 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $1.4 million on total equity of $11.6 million. The bank experienced an annualized return on average assets, or ROA, of 1.30 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.