Safe and Sound

First Business Bank

Madison, WI
4
Star Rating
Started in 1909, First Business Bank is an FDIC-insured bank headquartered in Madison, WI. The bank holds equity of $196.5 million on assets of $1.79 billion, according to December 31, 2017, regulatory filings.

With 150 full-time employees in 7 offices in multiple states, the bank holds loans and leases worth $1.49 billion, including real estate loans of $956.9 million. U.S. bank customers currently have $1.40 billion in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, First Business Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a breakdown of how the bank fared on the three key criteria Bankrate used to score American banks.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

Capital is a key measurement of an institution's financial resilience. It works as a bulwark against losses and provides protection for depositors during times of financial trouble for the bank. When looking at safety and soundness, the higher the capital, the better.

On our test to measure capital adequacy, First Business Bank received a score of 12 out of a possible 30 points, falling short of the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. First Business Bank's Tier 1 capital ratio was 10.45 percent, exceeding the 6 percent level regulators consider adequate, but less than the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to financial headwinds.

Overall, First Business Bank held equity amounting to 10.99 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to determine the impact of troubled assets, such as unpaid mortgages, on the bank's capitalization and allocated loan loss reserves.

A bank with lots of these types of assets may eventually have to use capital to absorb losses, reducing its equity buffer. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, pushing down earnings and increasing the risk of a future failure.

First Business Bank fell short of the national average of 37.49 on Bankrate's test of asset quality, racking up 36 out of a possible 40 points .

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, 1.75 percent of First Business Bank'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 to deal with problem assets known as an "allowance for loan and lease losses." The size of that reserve can be a useful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on First Business Bank'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 use them to address problematic loans, potentially making the bank better able to withstand economic shocks. However, banks that are losing money are less able to do those things.

First Business Bank did above-average on Bankrate's test of earnings, achieving a score of 16 out of a possible 30.

One important measure of a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by the total amount of equity. First Business Bank's most recent annualized quarterly return on equity was 7.67 percent, below the national average of 8.10 percent.

The bank reported net income of $15.1 million on total equity of $196.5 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 0.84 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.