Safe and Sound

First Federal Savings Bank

Ottawa, IL
4
Star Rating
First Federal Savings Bank is an Ottawa, IL-based, FDIC-insured bank started in 1889. The bank has equity of $41.3 million on assets of $362.0 million, according to December 31, 2017, regulatory filings.

Thanks to the work of 112 full-time employees in 12 offices in IL, the bank currently holds loans and leases worth $238.7 million, including real estate loans of $239.3 million. U.S. bank customers currently have $316.5 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, First Federal Savings 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 major criteria Bankrate used to score U.S. banks.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a buffer against losses and affords protection for account holders when a bank is struggling financially. Therefore, a bank's level of capital is an essential measurement of a bank's financial fortitude. When it comes to safety and soundness, the more capital, the better.

First Federal Savings Bank racked up 14 out of a possible 30 points on our test to measure capital adequacy, better than the national average of 13.13.

One widely followed measure of this buffer is a bank's Tier 1 capital ratio. First Federal Savings Bank's Tier 1 capital ratio was 22.23 percent, higher than the 6 percent level regulators consider adequate, but under the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to economic difficulties.

Overall, First Federal Savings Bank held equity amounting to 11.39 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to estimate how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by problem assets, such as unpaid mortgages.

Having a large number of these types of assets could eventually require a bank to use capital to absorb losses, decreasing its cushion of equity. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, pushing down earnings and elevating the risk of a future failure.

On Bankrate's test of asset quality, First Federal Savings Bank scored 36 out of a possible 40 points, coming in below the national average of 37.49 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, 1.71 percent of First Federal Savings 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." Comparing how large that reserve is to the total amount of problem loans can be a handy indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on First Federal Savings Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money has an effect on its safety and soundness. Earnings can be retained by the bank, giving a boost to its capital buffer, or be used to deal with problematic loans, likely making the bank more resilient in tough times. Losses, on the other hand, diminish a bank's ability to do those things.

First Federal Savings Bank scored 6 out of a possible 30 on Bankrate's test of earnings, falling short of the national average of 15.12.

One important way to measure a bank's earnings is return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity. First Federal Savings Bank's most recent annualized quarterly return on equity was 2.70 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $1.1 million on total equity of $41.3 million. The bank had an annualized return on average assets, or ROA, of 0.30 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.