Safe and Sound

First Federal Savings and Loan Association

Newark, OH
4
Star Rating
First Federal Savings and Loan Association is a Newark, OH-based, FDIC-insured bank started in 1934. The bank has equity of $33.9 million on assets of $202.9 million, according to December 31, 2017, regulatory filings.

U.S. bank customers have $158.4 million on deposit at 6 offices in OH run by 55 full-time employees. With that footprint, the bank holds loans and leases worth $154.6 million, including $154.7 million worth of real estate loans.

Overall, Bankrate believes that, as of December 31, 2017, First Federal Savings and Loan Association exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a look at how the bank did on the three major criteria Bankrate used to evaluate American banks.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial resilience, capital is essential. It works as a buffer against losses and provides protection for depositors when a bank is struggling financially. When it comes to safety and soundness, more capital is better.

On our test to measure capital adequacy, First Federal Savings and Loan Association achieved a score of 24 out of a possible 30 points, above the national average of 13.13.

A bank's Tier 1 capital ratio is an important measure of this buffer. First Federal Savings and Loan Association's Tier 1 capital ratio was 26.79 percent, above the 6 percent level regulators consider adequate, and exceeding the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather economic challenges.

Overall, First Federal Savings and Loan Association held equity amounting to 16.70 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

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

A bank with large numbers of these types of assets may eventually have to use capital to absorb losses, reducing its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning interest for the bank, resulting in depressed earnings and potentially more risk of a failure in the future.

First Federal Savings and Loan Association scored 40 out of a possible 40 points on Bankrate's asset quality test, better than the national average of 37.49.

The percentage of problem assets a bank holds compared to its total assets is a widely used indicator of asset quality.As of December 31, 2017, 0.23 percent of First Federal Savings and Loan Association'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 1.01 percent.

Banks keep a reserve known as an "allowance for loan and lease losses" to deal with problem assets . Comparing the reserve's size to the total amount of at-risk loans can be a handy indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on First Federal Savings and Loan Association'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, increasing its capital buffer, or put them to work addressing problematic loans, potentially making the bank better prepared to withstand economic trouble. Losses, on the other hand, diminish a bank's ability to do those things.

First Federal Savings and Loan Association fell behind the national average on Bankrate's test of earnings, achieving a score of 4 out of a possible 30.

Return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity, is one important way to measure a bank's earnings. First Federal Savings and Loan Association's most recent annualized quarterly return on equity was 1.88 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $631,000 on total equity of $33.9 million. The bank reported an annualized return on average assets, or ROA, of 0.32 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.