Safe and Sound

First Midwest Bank

Itasca, IL
4
Star Rating
First Midwest Bank is an Itasca, IL-based, FDIC-insured bank founded in 1933. The bank has equity of $1.89 billion on $14.01 billion in assets, according to December 31, 2017, regulatory filings.

U.S. bank customers have $11.18 billion on deposit at 129 offices in multiple states run by 2,105 full-time employees. With that footprint, the bank has amassed loans and leases worth $10.36 billion, including $6.55 billion worth of real estate loans.

Overall, Bankrate believes that, as of December 31, 2017, First Midwest Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's an analysis of 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

Capital acts as a buffer against losses and provides protection for depositors when a bank is struggling financially. It follows then that when it comes to measuring an a bank's financial stability, capital is crucial. When looking at safety and soundness, the higher the capital, the better.

First Midwest Bank received a score of 8 out of a possible 30 points on our test to measure capital adequacy, lower than the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. First Midwest Bank's Tier 1 capital ratio was 10.13 percent, exceeding the 6 percent level regulators consider adequate, but below the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to economic challenges.

Overall, First Midwest Bank held equity amounting to 13.48 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to determine the impact of problem assets, such as past-due loans, on the bank's capitalization and allocated loan loss reserves.

Having a large number of these types of assets suggests a bank may have 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, decreasing earnings and increasing the risk of a failure in the future.

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

A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.75 percent of First Midwest Bank'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 maintain a reserve to deal with troubled assets known as an "allowance for loan and lease losses." That reserve's size can be a helpful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on First Midwest Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its long-term survivability. Earnings may be retained by the bank, boosting its capital cushion, or be used to deal with problematic loans, likely making the bank better able to withstand financial trouble. Banks that are losing money, however, have less ability to do those things.

On Bankrate's earnings test, First Midwest Bank scored 14 out of a possible 30, below the national average of 15.12.

One widely used measure of a bank's earnings is return on equity, calculated by dividing net income (profit, essentially) by total equity. First Midwest Bank's most recent annualized quarterly return on equity was 7.03 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $122.9 million on total equity of $1.89 billion. The bank experienced an annualized return on average assets, or ROA, of 0.92 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.