Safe and Sound

First National Bank of Waterloo

Waterloo, IL
4
Star Rating
First National Bank of Waterloo is a Waterloo, IL-based, FDIC-insured bank that opened its doors in 1912. Regulatory filings show the bank having equity of $50.1 million on assets of $460.6 million, as of June 30, 2017.

Thanks to the work of 106 full-time employees in 9 offices in IL, the bank currently holds loans and leases worth $204.8 million, including real estate loans of $177.0 million. U.S. bank customers currently have $396.4 million in deposits with the bank.

Overall, Bankrate believes that, as of June 30, 2017, First National Bank of Waterloo exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a breakdown of how the bank faired on the three key criteria Bankrate used to grade American banks.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a buffer against losses and affords protection for accountholders during times of financial instability for the bank. It follows then that a bank's level of capital is an important measurement of a bank's financial fortitude. From a safety and soundness perspective, more capital is preferred.
On our test to measure the adequacy of a bank's capital, First National Bank of Waterloo received a score of 12 out of a possible 30 points, less than the national average of 13.38.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. First National Bank of Waterloo's Tier 1 capital ratio was 17.65 percent, above the 6 percent level regulators consider adequate, but less than the national average of 25.16 percent. A higher capital ratio means the bank will be better able to weather financial headwinds.

Overall, First National Bank of Waterloo held equity amounting to 10.87 percent of its assets, which was lower than the national average of 12.10 percent.

Asset Quality Score

Bankrate uses this test to determine the effect of problem assets, such as unpaid mortgages, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

Having extensive holdings of these kinds of assets could eventually force a bank to use capital to absorb losses, shrinking its cushion 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, diminishing earnings and elevating the chances of a future failure.

On Bankrate's test of asset quality, First National Bank of Waterloo scored 36 out of a possible 40 points, falling short of the national average of 37.62 points.

A handy indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of June 30, 2017, 0.38 percent of First National Bank of Waterloo'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 1.04 percent.

Banks keep a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . That reserve's size can be a helpful 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 First National Bank of Waterloo's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability affects its safety and soundness. A bank can retain its earnings, boosting its capital cushion, or put them to work addressing 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.

First National Bank of Waterloo scored 12 out of a possible 30 on Bankrate's earnings test, failing to reach the national average of 16.52.

One widely used measure of a bank's earnings is return on equity, or net income (essentially profit) divided by the total amount of equity. The most recent annualized quarterly return on equity for First National Bank of Waterloo was 5.48 percent, below the national average of 9.28 percent.

For the twelve months ended June 30, 2017, the bank recorded net income of $1.3 million on total equity of $50.1 million. The bank had an annualized return on average assets, or ROA, of 0.59 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below 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.