Safe and Sound

First American Bank

Stonewall, OK
5
Star Rating
First American Bank is a Stonewall, OK-based, FDIC-insured bank dating back to 1940. The bank has equity of $3.5 million on $32,893,000 in assets, according to June 30, 2017, regulatory filings.

With 11 full-time employees, the bank currently holds loans and leases worth $22.3 million, including real estate loans of $12.0 million. U.S. bank customers currently have $29.3 million in deposits with the bank.

Overall, Bankrate believes that, as of June 30, 2017, First American Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a breakdown of how the bank faired on the three important criteria Bankrate used to grade U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a cushion against losses and affords protection for depositors when a bank is experiencing financial trouble. Therefore, when it comes to measuring an an institution's financial resilience, capital is useful. When looking at safety and soundness, the higher the capital, the better.
On our test to measure capital adequacy, First American Bank received a score of 12 out of a possible 30 points, failing to reach the national average of 13.38.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. First American Bank's Tier 1 capital ratio was 15.65 percent, exceeding the 6 percent level regulators consider adequate, but under the national average of 25.16 percent. A higher capital ratio means the bank will be better able to stand up to economic downturns.

Overall, First American Bank held equity amounting to 10.74 percent of its assets, which was lower than the national average of 12.10 percent.

Asset Quality Score

Bankrate uses this test to estimate the effect 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 large numbers of these kinds of assets may eventually be forced to use capital to cover losses, decreasing 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 interest for the bank, resulting in reduced earnings and potentially more risk of a future failure.

On Bankrate's asset quality test, First American Bank scored 36 out of a possible 40 points, less than the national average of 37.62 points.

The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of June 30, 2017, 1.09 percent of First American Bank'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 1.04 percent.

Banks keep a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . That reserve's size can be a helpful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on First American Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance has an effect on its long-term survivability. A bank can retain its earnings, giving a boost to its capital cushion, or put them to work addressing problematic loans, likely making the bank more resilient in times of trouble. However, banks that are losing money have less ability to do those things.

On Bankrate's test of earnings, First American Bank scored 24 out of a possible 30, better than the national average of 16.52.

One widely used way to measure a bank's earnings is return on equity, or net income (profit, basically) divided by total equity. First American Bank's most recent annualized quarterly return on equity was 16.01 percent, above the national average of 9.28 percent.

The bank recorded net income of $279,000 on total equity of $3.5 million for the twelve months ended June 30, 2017. The bank reported an annualized return on average assets, or ROA, of 1.75 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.