Safe and Sound

Northwest Bank of Rockford

Rockford, IL
4
Star Rating
Rockford, IL-based Northwest Bank of Rockford is an FDIC-insured bank founded in 1972. Regulatory filings show the bank having equity of $26.7 million on $281.7 million in assets, as of December 31, 2017.

U.S. bank customers have $235.3 million on deposit at 5 offices in IL run by 76 full-time employees. With that footprint, the bank has amassed loans and leases worth $208.5 million, $137.1 million of which are for real estate.

Overall, Bankrate believes that, as of December 31, 2017, Northwest Bank of Rockford exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a breakdown of how the bank did on the three key criteria Bankrate used to score American banks.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial resilience, capital is essential. It acts as a bulwark against losses and as protection for accountholders when a bank is struggling financially. From a safety and soundness perspective, the higher the capital, the better.

Northwest Bank of Rockford fell below the national average of 13.13 on our test to measure the adequacy of a bank's capital, racking up 10 out of a possible 30 points.

A bank's Tier 1 capital ratio is an essential measure of this buffer. Northwest Bank of Rockford's Tier 1 capital ratio was 11.34 percent, above the 6 percent level considered adequate by regulators, but less than the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to economic headwinds.

Overall, Northwest Bank of Rockford held equity amounting to 9.47 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 loan loss reserves and overall capitalization could be affected by troubled assets, such as past-due mortgages.

Having extensive holdings of these kinds of assets could eventually require a bank to use capital to absorb losses, cutting down on its buffer of equity. Many of those assets are also likely to be in non-accrual status and no longer earning money, resulting in lower earnings and potentially more risk of a future failure.

On Bankrate's asset quality test, Northwest Bank of Rockford scored 28 out of a possible 40 points, below the national average of 37.49 points.

A helpful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 3.18 percent of Northwest Bank of Rockford'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 known as an "allowance for loan and lease losses" to deal with problem assets . Comparing the reserve's size to the total amount of problem loans can be a useful indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Northwest Bank of Rockford's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its safety and soundness. A bank can retain its earnings, expanding its capital cushion, or use them to address problematic loans, likely making the bank better able to withstand financial trouble. Losses, on the other hand, reduce a bank's ability to do those things.

Northwest Bank of Rockford scored 18 out of a possible 30 on Bankrate's test of earnings, beating out the national average of 15.12.

One important measure of a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by total equity. The most recent annualized quarterly return on equity for Northwest Bank of Rockford was 9.66 percent, above the national average of 8.10 percent.

The bank earned net income of $2.5 million on total equity of $26.7 million for the twelve months ended December 31, 2017. 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.