Safe and Sound

First American Bank

Stonewall, OK
5
Star Rating
Stonewall, OK-based First American Bank is an FDIC-insured bank started in 1940. As of December 31, 2017, the bank held equity of $3.6 million on assets of $29.9 million.

Thanks to the efforts of 11 full-time employees, the bank has amassed loans and leases worth $21.1 million, $11.0 million of which are for real estate. The bank currently holds $26.3 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, First American Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a breakdown of how the bank fared on the three important criteria Bankrate used to grade American banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a buffer against losses and provides protection for account holders when a bank is experiencing financial instability. Therefore, a bank's level of capital is an important measurement of a bank's financial resilience. When it comes to safety and soundness, the more capital, the better.

First American Bank scored 14 out of a possible 30 points on our test to measure capital adequacy, exceeding the national average of 13.13.

One important measure of this buffer is a bank's Tier 1 capital ratio. First American Bank's Tier 1 capital ratio was 16.97 percent, above the 6 percent level considered adequate by regulators, but under the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather financial downturns.

Overall, First American Bank held equity amounting to 11.89 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to determine the effect of problem assets, such as unpaid mortgages, on the bank's capitalization and allocated loan loss reserves.

A bank with large numbers of these types of assets could eventually be forced to use capital to absorb losses, shrinking its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, pushing down earnings and elevating the chances of a future failure.

First American Bank did better than the national average of 37.49 on Bankrate's test of asset quality, racking up 40 out of a possible 40 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, 0.40 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 1.01 percent.

Banks maintain a reserve to handle troubled assets known as an "allowance for loan and lease losses." Comparing the size of that reserve to the total amount of at-risk loans can be a widely used 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

A bank's earnings performance affects its safety and soundness. A bank can retain its earnings, boosting its capital buffer, or use them to deal with problematic loans, potentially making the bank more resilient in times of trouble. Losses, on the other hand, lessen a bank's ability to do those things.

First American Bank did above-average on Bankrate's test of earnings, achieving a score of 22 out of a possible 30.

One key measure of a bank's earnings is return on equity, calculated by dividing net income (profit, essentially) by total equity. First American Bank's most recent annualized quarterly return on equity was 13.32 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $469,000 on total equity of $3.6 million. The bank experienced an annualized return on average assets, or ROA, of 1.50 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above 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.