Safe and Sound

1st Equity Bank

Skokie, IL
4
Star Rating
1st Equity Bank is an FDIC-insured bank founded in 1997 and currently based in Skokie, IL. Regulatory filings show the bank having equity of $14.7 million on assets of $104.8 million, as of December 31, 2017.

With 12 full-time employees, the bank holds loans and leases worth $84.5 million, including real estate loans of $71.2 million. U.S. bank customers currently have $82.4 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, 1st Equity Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for an analysis of how the bank fared on the three important criteria Bankrate used to score American banks.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial fortitude, capital is useful. It works as a cushion against losses and provides protection for depositors when a bank is struggling financially. From a safety and soundness perspective, the more capital, the better.

On our test to measure capital adequacy, 1st Equity Bank racked up 20 out of a possible 30 points, 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's Tier 1 capital ratio was 17.95 percent, exceeding the 6 percent level considered adequate by regulators, but lower than the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to financial downturns.

Overall, 1st Equity Bank held equity amounting to 14.01 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

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

A bank with a large number of these types of assets could eventually be required to use capital to cover losses, reducing its buffer of equity. Many of those assets are also likely to be in non-accrual status and no longer earning money, resulting in diminished earnings and potentially more risk of a future failure.

On Bankrate's test of asset quality, 1st Equity Bank scored 24 out of a possible 40 points, falling short of 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, 6.39 percent of 1st Equity Bank'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 1.01 percent.

Banks maintain a reserve to deal with troubled assets known as an "allowance for loan and lease losses." How large that reserve is can be a helpful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on 1st Equity 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 can be retained by the bank, boosting its capital buffer, or be used to deal with problematic loans, likely making the bank more resilient in tough times. Banks that are losing money, however, are less able to do those things.

1st Equity Bank beat the national average on Bankrate's earnings test, achieving a score of 20 out of a possible 30.

One widely used way to measure a bank's earnings is return on equity, or net income (profit, basically) divided by the total amount of equity. The most recent annualized quarterly return on equity for 1st Equity Bank was 11.13 percent, above the national average of 8.10 percent.

The bank earned net income of $1.6 million on total equity of $14.7 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 1.69 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.