Safe and Sound

First American Bank

Fort Dodge, IA
5
Star Rating
First American Bank is an FDIC-insured bank founded in 1934 and currently headquartered in Fort Dodge, IA. Regulatory filings show the bank having equity of $104.7 million on $923,507,000 in assets, as of June 30, 2017.

With 195 full-time employees in 15 offices in multiple states, the bank currently holds loans and leases worth $540.3 million, including real estate loans of $500.4 million. U.S. bank customers currently have $654.0 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. Keep reading for an analysis of how the bank did on the three key criteria Bankrate used to score American banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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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 works as a cushion against losses and provides protection for depositors during periods of financial trouble for the bank. When it comes to safety and soundness, the higher the capital, the better.
On our test to measure capital adequacy, First American Bank achieved a score of 14 out of a possible 30 points, beating the national average of 13.38.

One commonly used measure of this buffer is a bank's Tier 1 capital ratio. First American Bank's Tier 1 capital ratio was 18.49 percent, exceeding the 6 percent level regulators consider adequate, but under the national average of 25.16 percent. The higher the capital ratio, the better the bank will be able to stand up to financial headwinds.

Overall, First American Bank held equity amounting to 11.34 percent of its assets, which was lower than the national average of 12.10 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 problem assets, such as past-due mortgages.

Having a large number of these kinds of assets could eventually force a bank to use capital to absorb losses, diminishing its buffer of equity. It also means that there are likely to be many assets that are in non-accrual status and no longer earning interest for the bank, pushing down earnings and increasing the risk of a future failure.

First American Bank finished below the national average of 37.62 on Bankrate's test of asset quality, racking up 36 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 June 30, 2017, 0.93 percent of First American Bank's loans were noncurrent -- in other words, 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 to handle troubled assets known as an "allowance for loan and lease losses." Comparing the how large that reserve is to the total amount of at-risk loans can be a helpful indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on First American Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its long-term survivability. Earnings can be retained by the bank, expanding its capital cushion, 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 American Bank scored 26 out of a possible 30 on Bankrate's earnings test, exceeding the national average of 16.52.

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 American Bank was 16.33 percent, above the national average of 9.28 percent.

For the twelve months ended June 30, 2017, the bank earned net income of $8.6 million on total equity of $104.7 million. The bank experienced an annualized return on average assets, or ROA, of 1.78 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.