Safe and Sound

Principal Bank

Des Moines, IA
5
Star Rating
Principal Bank is an FDIC-insured bank started in 1998 and currently headquartered in Des Moines, IA. Regulatory filings show the bank having equity of $187.0 million on $2,406,131,000 in assets, as of June 30, 2017.

Thanks to the efforts of 140 full-time employees, the bank currently holds loans and leases worth $729.1 million, $739.2 million of which are for real estate. U.S. bank customers currently have $2.20 billion in deposits with the bank.

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

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

Capital acts as a buffer against losses and as protection for accountholders when a bank is experiencing economic instability. It follows then that a bank's level of capital is a crucial measurement of a bank's financial strength. From a safety and soundness perspective, the higher the capital, the better.
Principal Bank fell short of the national average of 13.38 on our test to measure capital adequacy, racking up 6 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Principal Bank's Tier 1 capital ratio was 13.17 percent, above the 6 percent level considered adequate by regulators, but lower than the national average of 25.16 percent. The higher the capital ratio, the better the bank will be able to stand up to financial challenges.

Overall, Principal Bank held equity amounting to 7.77 percent of its assets, which was lower than the national average of 12.10 percent.

Asset Quality Score

In this test, Bankrate tries to estimate the effect of troubled assets, such as unpaid loans, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

Having lots of these types of assets suggests a bank may eventually have to use capital to absorb losses, decreasing its equity buffer. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, resulting in depressed earnings and potentially more risk of a failure in the future.

Principal Bank exceeded the national average of 37.62 on Bankrate's asset quality test, racking up 40 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 June 30, 2017, 1.33 percent of Principal 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 1.04 percent.

Banks maintain a reserve known as an "allowance for loan and lease losses" to deal with problem assets . That reserve's size can be a widely used 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 Principal 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. 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 better prepared to withstand economic trouble. However, banks that are losing money have less ability to do those things.

Principal Bank beat the national average on Bankrate's test of earnings, achieving a score of 24 out of a possible 30.

One widely used measure of a bank's earnings is return on equity, or net income (profit, essentially) divided by the total amount of equity. Principal Bank's most recent annualized quarterly return on equity was 16.63 percent, above the national average of 9.28 percent.

The bank earned net income of $14.7 million on total equity of $187.0 million for the twelve months ended June 30, 2017. The bank experienced an annualized return on average assets, or ROA, of 1.23 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.