Safe and Sound

First Bank of Newton

Newton, KS
4
Star Rating
Newton, KS-based First Bank of Newton is an FDIC-insured bank founded in 1873. Regulatory filings show the bank having equity of $18.0 million on assets of $196.4 million, as of December 31, 2017.

Thanks to the work of 51 full-time employees in 4 offices in KS, the bank currently holds loans and leases worth $163.7 million, $113.8 million of which are for real estate. The bank currently holds $168.7 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, First Bank of Newton exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for an analysis of how the bank did on the three important criteria Bankrate used to evaluate U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a buffer against losses and affords protection for account holders when a bank is struggling financially. It follows then that a bank's level of capital is a key measurement of a bank's financial resilience. When it comes to safety and soundness, the higher the capital, the better.

First Bank of Newton fell short of the national average of 13.13 on our test to measure the adequacy of a bank's capital, receiving a score of 10 out of a possible 30 points.

One widely followed measure of this buffer is a bank's Tier 1 capital ratio. First Bank of Newton's Tier 1 capital ratio was 12.75 percent, exceeding the 6 percent level regulators consider adequate, but under the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to financial difficulties.

Overall, First Bank of Newton held equity amounting to 9.18 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test is intended to estimate how the bank's loan loss reserves and overall capitalization could be affected by problem assets, such as past-due mortgages.

A bank with extensive holdings of these kinds of assets could eventually be required to use capital to absorb losses, shrinking its buffer of equity. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, resulting in diminished earnings and potentially more risk of a future failure.

First Bank of Newton finished below the national average of 37.49 on Bankrate's asset quality test, racking up 36 out of a possible 40 points .

The percentage of problem assets a bank holds compared to its total assets is a handy indicator of asset quality.As of December 31, 2017, 0.62 percent of First Bank of Newton'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 1.01 percent.

Banks keep a reserve known as an "allowance for loan and lease losses" to deal with problem assets . The size of that reserve can be a helpful 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 First Bank of Newton's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability has an effect on its safety and soundness. A bank can retain its earnings, expanding its capital buffer, or put them to work addressing problematic loans, potentially making the bank more resilient in tough times. Conversely, losses lessen a bank's ability to do those things.

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

One key way to measure a bank's earnings is return on equity, or net income (profit, basically) divided by the total amount of equity. First Bank of Newton's most recent annualized quarterly return on equity was 13.32 percent, above the national average of 8.10 percent.

The bank recorded net income of $2.3 million on total equity of $18.0 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 1.21 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.