Safe and Sound

The Litchfield National Bank

Litchfield, IL
4
Star Rating
Litchfield, IL-based The Litchfield National Bank is an FDIC-insured bank started in 1907. As of December 31, 2017, the bank held equity of $8.6 million on $103.9 million in assets.

With 33 full-time employees in 3 offices in IL, the bank currently holds loans and leases worth $76.7 million, including real estate loans of $52.5 million. U.S. bank customers currently have $91.9 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, The Litchfield National Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's an analysis of how the bank fared on the three major criteria Bankrate used to grade American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital is a useful measurement of an institution's financial fortitude. It acts as a cushion against losses and provides protection for accountholders when a bank is experiencing financial trouble. From a safety and soundness perspective, the higher the capital, the better.

The Litchfield National Bank came in below the national average of 13.13 on our test to measure capital adequacy, scoring 8 out of a possible 30 points.

One commonly used measure of this buffer is a bank's Tier 1 capital ratio. The Litchfield National Bank's Tier 1 capital ratio was 11.46 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 challenges.

Overall, The Litchfield National Bank held equity amounting to 8.31 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test is intended to estimate how the bank's loan loss reserves and overall capitalization could be affected by troubled assets, such as unpaid loans.

Having extensive holdings of these kinds of assets means a bank could eventually have to use capital to absorb losses, decreasing its buffer of equity. It also means that there are likely to be many assets that are in non-accrual status and no longer earning interest for the bank, resulting in reduced earnings and potentially more risk of a failure in the future.

On Bankrate's test of asset quality, The Litchfield National Bank scored 36 out of a possible 40 points, lower than 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, 1.08 percent of The Litchfield 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 maintain a reserve known as an "allowance for loan and lease losses" to deal with problem assets . The size of that reserve can be a widely used indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on The Litchfield National Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance affects its safety and soundness. A bank can retain its earnings, increasing its capital buffer, or put them to work addressing problematic loans, potentially making the bank more resilient in tough times. Conversely, losses diminish a bank's ability to do those things.

The Litchfield National Bank scored 18 out of a possible 30 on Bankrate's earnings test, beating the national average of 15.12.

Return on equity, calculated by dividing net income (profit, basically) by total equity, is one key measure of a bank's earnings. The most recent annualized quarterly return on equity for The Litchfield National Bank was 9.25 percent, above the national average of 8.10 percent.

The bank reported net income of $780,000 on total equity of $8.6 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 0.78 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.