Safe and Sound

1st Equity Bank Northwest

Buffalo Grove, IL
5
Star Rating
Buffalo Grove, IL-based 1st Equity Bank Northwest is an FDIC-insured bank founded in 2003. As of December 31, 2017, the bank had equity of $8.9 million on $42.5 million in assets.

Thanks to the efforts of 4 full-time employees, the bank has amassed loans and leases worth $34.2 million, $32.2 million of which are for real estate. The bank currently holds $33.5 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, 1st Equity Bank Northwest exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a breakdown of how the bank did on the three important criteria Bankrate used to grade 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 provides protection for account holders when a bank is experiencing financial instability. It follows then that when it comes to measuring an a bank's financial strength, capital is essential. From a safety and soundness perspective, the higher the capital, the better.

1st Equity Bank Northwest racked up 30 out of a possible 30 points on our test to measure capital adequacy, beating the national average of 13.13.

A bank's Tier 1 capital ratio is a commonly used measure of this buffer. 1st Equity Bank Northwest's Tier 1 capital ratio was 27.59 percent, exceeding the 6 percent level regulators consider adequate, and exceeding 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, 1st Equity Bank Northwest held equity amounting to 20.96 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to determine the effect of troubled assets, such as past-due loans, on the bank's capitalization and allocated loan loss reserves.

Having large numbers of these kinds of assets means a bank could have to use capital to absorb losses, cutting down on 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 failure in the future.

1st Equity Bank Northwest scored 24 out of a possible 40 points on Bankrate's test of asset quality, lower than the national average of 37.49.

The percentage of problem assets a bank holds compared to its total assets is a useful indicator of asset quality.As of December 31, 2017, 8.08 percent of 1st Equity Bank Northwest'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 keep a reserve known as an "allowance for loan and lease losses" to deal with problem assets . That reserve's size 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 1st Equity Bank Northwest's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability has an effect on its safety and soundness. Earnings can be retained by the bank, giving a boost to its capital cushion, or be used to address problematic loans, likely making the bank more resilient in times of trouble. Losses, on the other hand, take away from a bank's ability to do those things.

1st Equity Bank Northwest received above-average marks on Bankrate's test of earnings, achieving a score of 18 out of a possible 30.

Return on equity, calculated by dividing net income (essentially, profit) by the total amount of equity, is one important measure of a bank's earnings. 1st Equity Bank Northwest's most recent annualized quarterly return on equity was 9.47 percent, above the national average of 8.10 percent.

The bank recorded net income of $824,000 on total equity of $8.9 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 2.11 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.