Safe and Sound

First Nations Bank

Chicago, IL
5
Star Rating
Chicago, IL-based First Nations Bank is an FDIC-insured bank started in 1976. The bank has equity of $41.8 million on assets of $337.9 million, according to December 31, 2017, regulatory filings.

Thanks to the efforts of 38 full-time employees in 3 offices in IL, the bank holds loans and leases worth $273.7 million, including real estate loans of $267.5 million. U.S. bank customers currently have $271.3 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, First Nations Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a look at how the bank did on the three important criteria Bankrate used to evaluate U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital is a key measurement of a bank's financial fortitude. It acts as a buffer against losses and affords protection for accountholders when a bank is experiencing financial trouble. When it comes to safety and soundness, the more capital, the better.

On our test to measure the adequacy of a bank's capital, First Nations Bank achieved a score of 16 out of a possible 30 points, above the national average of 13.13.

One commonly used measure of this buffer is a bank's Tier 1 capital ratio. First Nations Bank's Tier 1 capital ratio was 15.55 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 downturns.

Overall, First Nations Bank held equity amounting to 12.36 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 past-due loans.

Having a large number of these types of assets could eventually require a bank to use capital to cover losses, reducing its equity buffer. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, decreasing earnings and increasing the chances of a failure in the future.

First Nations Bank did better than the national average of 37.49 on Bankrate's test of asset quality, racking up 40 out of a possible 40 points .

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, 0.04 percent of First Nations Bank's loans were noncurrent, meaning 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 to deal with troubled assets known as an "allowance for loan and lease losses." Comparing the size of that reserve to the total amount of problematic loans can be a helpful indicator when evaluating a bank's ability to manage troubled assets. First Nations Bank's loan loss allowance was 6,412.10 percent of its total noncurrent loans, higher than the national average. All else being equal, the higher the ratio of loan loss allowance to noncurrent loans, the better.

Earnings score

How profitable a bank is has an effect on its safety and soundness. Earnings can be retained by the bank, increasing its capital buffer, or be used to deal with problematic loans, potentially making the bank more resilient in tough times. However, banks that are losing money are less able to do those things.

First Nations Bank scored 18 out of a possible 30 on Bankrate's test of earnings, above the national average of 15.12.

Return on equity, calculated by dividing net income (profit, basically) by total equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for First Nations Bank was 8.72 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $3.5 million on total equity of $41.8 million. The bank reported an annualized return on average assets, or ROA, of 1.06 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above 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.