Safe and Sound

First Community Bank

Newell, IA
4
Star Rating
Founded in 1912, First Community Bank is an FDIC-insured bank based in Newell, IA. As of December 31, 2017, the bank had equity of $11.8 million on assets of $93.9 million.

Thanks to the efforts of 21 full-time employees in 4 offices in IA, the bank has amassed loans and leases worth $50.2 million, including $34.5 million worth of real estate loans. The bank currently holds $76.1 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, First Community Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a breakdown of how the bank fared on the three key criteria Bankrate used to grade American banks.

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SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial resilience, capital is essential. It acts as a bulwark against losses and affords protection for accountholders when a bank is experiencing financial instability. From a safety and soundness perspective, the more capital, the better.

On our test to measure capital adequacy, First Community Bank received a score of 10 out of a possible 30 points, coming in below the national average of 13.13.

One widely used measure of this buffer is a bank's Tier 1 capital ratio. First Community Bank's Tier 1 capital ratio was 14.12 percent, higher than the 6 percent level regulators consider adequate, but less than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather financial difficulties.

Overall, First Community Bank held equity amounting to 12.58 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to determine the effect of troubled assets, such as past-due loans, on the bank's capitalization and allocated loan loss reserves.

Having large numbers of these types of assets could eventually force a bank to use capital to cover losses, diminishing its cushion 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.

On Bankrate's test of asset quality, First Community Bank scored 28 out of a possible 40 points, falling short of the national average of 37.49 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, 0.11 percent of First Community Bank'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 troubled assets . Comparing the reserve's size 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 Community 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, increasing its capital cushion, or be used to deal with problematic loans, likely making the bank more resilient in tough times. However, banks that are losing money have less ability to do those things.

On Bankrate's test of earnings, First Community Bank scored 18 out of a possible 30, above the national average of 15.12.

One important way to measure a bank's earnings is return on equity, or net income (profit, essentially) divided by total equity. The most recent annualized quarterly return on equity for First Community Bank was 8.84 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $1.0 million on total equity of $11.8 million. The bank reported an annualized return on average assets, or ROA, of 1.10 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.