Safe and Sound

1st Equity Bank Northwest

Buffalo Grove, IL
5
Star Rating
1st Equity Bank Northwest is a Buffalo Grove, IL-based, FDIC-insured bank started in 2003. The bank holds equity of $8.8 million on $38,452,000 in assets, according to June 30, 2017, regulatory filings.

With 4 full-time employees, the bank holds loans and leases worth $32.2 million, including real estate loans of $31.0 million. U.S. bank customers currently have $29.6 million in deposits with the bank.

Overall, Bankrate believes that, as of June 30, 2017, 1st Equity Bank Northwest exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a look at how the bank did on the three major 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 works as a buffer against losses and provides protection for accountholders when a bank is experiencing financial instability. It follows then that a bank's level of capital is an important measurement of an institution's financial fortitude. From a safety and soundness perspective, more capital is preferred.
1st Equity Bank Northwest achieved a score of 30 out of a possible 30 points on our test to measure capital adequacy, above the national average of 13.38.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. 1st Equity Bank Northwest's Tier 1 capital ratio was 29.33 percent, higher than the 6 percent level considered adequate by regulators, and higher than the national average of 25.16 percent. A higher capital ratio means the bank will be better able to stand up to economic headwinds.

Overall, 1st Equity Bank Northwest held equity amounting to 22.86 percent of its assets, which exceeded the national average of 12.10 percent.

Asset Quality Score

This test's purpose is to estimate 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 extensive holdings of these types of assets suggests a bank may eventually have to use capital to cover losses, shrinking its buffer of equity. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning money, resulting in lower earnings and potentially more risk of a future failure.

1st Equity Bank Northwest scored 24 out of a possible 40 points on Bankrate's asset quality test, coming in below the national average of 37.62.

A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of June 30, 2017, 8.28 percent of 1st Equity Bank Northwest's loans were noncurrent -- in other words, they were more than 90 days past due or were in non-accrual status. That's above the national average of 1.04 percent.

Banks keep a reserve to deal with troubled assets known as an "allowance for loan and lease losses." Comparing the the size of that reserve to the total amount of problem loans can be a handy indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on 1st Equity Bank Northwest's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its long-term survivability. A bank can retain its earnings, expanding its capital cushion, or use them to address problematic loans, likely making the bank more resilient in tough times. Losses, on the other hand, reduce a bank's ability to do those things.

On Bankrate's earnings test, 1st Equity Bank Northwest scored 26 out of a possible 30, exceeding the national average of 16.52.

One key measure of a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by the total amount of equity. The most recent annualized quarterly return on equity for 1st Equity Bank Northwest was 16.62 percent, above the national average of 9.28 percent.

For the twelve months ended June 30, 2017, the bank recorded net income of $713,000 on total equity of $8.8 million. The bank reported an annualized return on average assets, or ROA, of 3.80 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above the average for U.S. banks of 1.14 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.