Safe and Sound

Mutual Federal Bank

Chicago, IL
4
Star Rating
Chicago, IL-based Mutual Federal Bank is an FDIC-insured bank founded in 1905. Regulatory filings show the bank having equity of $13.6 million on $90.7 million in assets, as of December 31, 2017.

Thanks to the efforts of 37 full-time employees, the bank currently holds loans and leases worth $72.1 million, $72.9 million of which are for real estate. U.S. bank customers currently have $70.4 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Mutual Federal Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's an analysis of how the bank fared on the three major criteria Bankrate used to grade American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a cushion against losses and provides protection for depositors during times of economic instability for the bank. Therefore, when it comes to measuring an an institution's financial resilience, capital is valuable. When looking at safety and soundness, the higher the capital, the better.

On our test to measure the adequacy of a bank's capital, Mutual Federal Bank scored 22 out of a possible 30 points, above the national average of 13.13.

One widely used measure of this buffer is a bank's Tier 1 capital ratio. Mutual Federal Bank's Tier 1 capital ratio was 20.09 percent, exceeding the 6 percent level regulators consider adequate, but lower than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather economic difficulties.

Overall, Mutual Federal Bank held equity amounting to 15.04 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to determine the impact of problem assets, such as past-due loans, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

A bank with a large number of these types of assets could eventually have to use capital to absorb losses, cutting down on its cushion of equity. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, pushing down earnings and increasing the risk of a failure in the future.

Mutual Federal Bank scored 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, 2.42 percent of Mutual Federal 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 known as an "allowance for loan and lease losses" to deal with troubled assets . 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 problem assets. Unfortunately, the FDIC did not provide information on Mutual Federal Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money affects its long-term survivability. Earnings may be retained by the bank, giving a boost to its capital cushion, or be used to deal with problematic loans, potentially making the bank more resilient in tough times. Losses, on the other hand, take away from a bank's ability to do those things.

Mutual Federal Bank did below-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 widely used measure of a bank's earnings. Mutual Federal Bank's most recent annualized quarterly return on equity was 1.22 percent, below the national average of 8.10 percent.

The bank recorded net income of $166,000 on total equity of $13.6 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 0.20 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.