Safe and Sound

Washington Federal Bank For Savings

Chicago, IL
4
Star Rating
Washington Federal Bank For Savings is a Chicago, IL-based, FDIC-insured bank started in 1913. The bank has equity of $20.4 million on assets of $162.8 million, according to June 30, 2017, regulatory filings.

U.S. bank customers have $140.9 million on deposit at 2 offices in IL run by 16 full-time employees. With that footprint, the bank holds loans and leases worth $132.8 million, including $133.3 million worth of real estate loans.

Overall, Bankrate believes that, as of June 30, 2017, Washington Federal Bank For Savings exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a look at how the bank did on the three important criteria Bankrate used to evaluate American banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial stability, capital is useful. It acts as a cushion against losses and as protection for depositors when a bank is experiencing financial trouble. From a safety and soundness perspective, the higher the capital, the better.
Washington Federal Bank For Savings exceeded the national average of 13.38 points on our test to measure the adequacy of a bank's capital, achieving a score of 16 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Washington Federal Bank For Savings's Tier 1 capital ratio was 24.74 percent, higher than the 6 percent level regulators consider adequate, but less than the national average of 25.16 percent. A higher capital ratio means the bank will be better able to weather economic challenges.

Overall, Washington Federal Bank For Savings held equity amounting to 12.55 percent of its assets, which exceeded the national average of 12.10 percent.

Asset Quality Score

This test's purpose is to estimate how the bank's capitalization and allocated loan loss reserves could be affected by troubled assets, such as past-due loans.

A bank with large numbers of these types of assets may eventually be forced to use capital to cover losses, cutting down on its equity cushion. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning money, reducing earnings and increasing the chances of a future failure.

Washington Federal Bank For Savings scored 40 out of a possible 40 points on Bankrate's test of asset quality, beating out the national average of 37.62.

A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of June 30, 2017, none of Washington Federal Bank For Savings'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 1.04 percent.

Banks maintain a reserve known as an "allowance for loan and lease losses" to deal with problem assets . How large that reserve is can be a handy indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on Washington Federal Bank For Savings's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its long-term survivability. A bank can retain its earnings, increasing its capital buffer, or use them to address problematic loans, potentially making the bank more resilient in tough times. Banks that are losing money, however, have less ability to do those things.

On Bankrate's earnings test, Washington Federal Bank For Savings scored 20 out of a possible 30, beating out the national average of 16.52.

One important way to measure a bank's earnings is return on equity, or net income (essentially profit) divided by total equity. Washington Federal Bank For Savings's most recent annualized quarterly return on equity was 11.27 percent, above the national average of 9.28 percent.

The bank reported net income of $1.1 million on total equity of $20.4 million for the twelve months ended June 30, 2017. The bank had an annualized return on average assets, or ROA, of 1.41 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above the average for U.S. banks of 1.14 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.