Safe and Sound

First Federal Savings Bank of Washington

4
Star Rating
First Federal Savings Bank of Washington is a Washington, IN-based, FDIC-insured bank dating back to 1895. Regulatory filings show the bank having equity of $9.3 million on assets of $62.3 million, as of December 31, 2017.

Thanks to the efforts of 22 full-time employees in 2 offices in IN, the bank currently holds loans and leases worth $42.4 million, including $38.1 million worth of real estate loans. The bank currently holds $52.8 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, First Federal Savings Bank of Washington exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for an analysis of how the bank did on the three key criteria Bankrate used to grade American banks.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial strength, capital is valuable. It works as a cushion against losses and provides protection for depositors when a bank is experiencing financial trouble. When it comes to safety and soundness, more capital is better.

First Federal Savings Bank of Washington achieved a score of 20 out of a possible 30 points on our test to measure capital adequacy, better than the national average of 13.13.

One essential measure of this buffer is a bank's Tier 1 capital ratio. First Federal Savings Bank of Washington's Tier 1 capital ratio was 27.62 percent, higher than the 6 percent level considered adequate by regulators, and exceeding the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather financial difficulties.

Overall, First Federal Savings Bank of Washington held equity amounting to 15.00 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 loan loss reserves and overall capitalization could be affected by troubled assets, such as unpaid mortgages.

Having a large number of these kinds of assets may eventually force a bank to use capital to cover losses, diminishing its equity buffer. Many of those assets are also likely to be in non-accrual status and thus aren't earning interest for the bank, reducing earnings and elevating the chances of a future failure.

First Federal Savings Bank of Washington finished below the national average of 37.49 on Bankrate's test of asset quality, racking up 36 out of a possible 40 points .

A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 2.90 percent of First Federal Savings Bank of Washington'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 troubled assets known as an "allowance for loan and lease losses." That reserve's size can be a useful 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 First Federal Savings Bank of Washington'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, increasing its capital cushion, or be used to deal with problematic loans, likely making the bank better able to withstand economic trouble. However, banks that are losing money are less able to do those things.

First Federal Savings Bank of Washington underperformed the average on Bankrate's earnings test, achieving a score of 2 out of a possible 30.

Return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity, is one widely used measure of a bank's earnings. The most recent annualized quarterly return on equity for First Federal Savings Bank of Washington was 0.42 percent, below the national average of 8.10 percent.

The bank reported net income of $39,000 on total equity of $9.3 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 0.06 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.