Safe and Sound

Town Center Bank

Frankfort, IL
3
Star Rating
Town Center Bank is a Frankfort, IL-based, FDIC-insured bank dating back to 2006. Regulatory filings show the bank having equity of $9.8 million on assets of $98.4 million, as of December 31, 2017.

U.S. bank customers have $85.4 million on deposit at 2 offices in IL run by 22 full-time employees. With that footprint, the bank holds loans and leases worth $67.2 million, including $56.8 million worth of real estate loans.

Overall, Bankrate believes that, as of December 31, 2017, Town Center Bank 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 score American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a buffer against losses and provides protection for account holders during times of economic trouble for the bank. Therefore, when it comes to measuring an a bank's financial stability, capital is valuable. From a safety and soundness perspective, more capital is preferred.

Town Center Bank came in below the national average of 13.13 on our test to measure the adequacy of a bank's capital, scoring 10 out of a possible 30 points.

One important measure of this buffer is a bank's Tier 1 capital ratio. Town Center Bank's Tier 1 capital ratio was 12.66 percent, higher than the 6 percent level considered adequate by regulators, but under the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather financial headwinds.

Overall, Town Center Bank held equity amounting to 9.93 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 capitalization and allocated loan loss reserves could be affected by troubled assets, such as unpaid mortgages.

A bank with lots of these kinds of assets could eventually have to use capital to cover losses, diminishing its equity cushion. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning interest for the bank, resulting in depressed earnings and potentially more risk of a failure in the future.

Town Center Bank scored 40 out of a possible 40 points on Bankrate's test of asset quality, exceeding 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, 0.39 percent of Town Center Bank'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 keep a reserve to deal with problem assets known as an "allowance for loan and lease losses." Comparing how large that reserve is to the total amount of problematic loans can be a useful indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Town Center Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its safety and soundness. Earnings may be retained by the bank, expanding its capital buffer, or be used to deal with problematic loans, potentially making the bank more resilient in times of trouble. However, banks that are losing money have less ability to do those things.

Town Center Bank fell behind the national average on Bankrate's test of earnings, achieving a score of 4 out of a possible 30.

Return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity, is one key measure of a bank's earnings. The most recent annualized quarterly return on equity for Town Center Bank was 1.52 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $151,000 on total equity of $9.8 million. The bank experienced an annualized return on average assets, or ROA, of 0.16 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.