Safe and Sound

First National Bank, Ames, Iowa

Ames, IA
4
Star Rating
Ames, IA-based First National Bank, Ames, Iowa is an FDIC-insured bank founded in 1903. Regulatory filings show the bank having equity of $76.6 million on assets of $756.2 million, as of December 31, 2017.

Thanks to the efforts of 117 full-time employees in 8 offices in IA, the bank has amassed loans and leases worth $416.4 million, including real estate loans of $397.9 million. The bank currently holds $635.7 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, First National Bank, Ames, Iowa exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a breakdown of how the bank fared on the three key criteria Bankrate used to score American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a bulwark against losses and as protection for account holders when a bank is struggling financially. It follows then that when it comes to measuring an a bank's financial stability, capital is key. From a safety and soundness perspective, the more capital, the better.

First National Bank, Ames, Iowa finished below 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 way to measure this buffer is looking at a bank's Tier 1 capital ratio. First National Bank, Ames, Iowa's Tier 1 capital ratio was 14.39 percent, above the 6 percent level considered adequate by regulators, but lower than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather economic headwinds.

Overall, First National Bank, Ames, Iowa held equity amounting to 10.13 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 capitalization and allocated loan loss reserves could be affected by problem assets, such as unpaid mortgages.

A bank with extensive holdings of these kinds of assets may eventually have to use capital to cover losses, shrinking its equity buffer. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, decreasing earnings and elevating the risk of a future failure.

On Bankrate's asset quality test, First National Bank, Ames, Iowa scored 40 out of a possible 40 points, beating out the national average of 37.49 points.

The percentage of problem assets a bank holds compared to its total assets is a useful indicator of asset quality.As of December 31, 2017, 0.31 percent of First National Bank, Ames, Iowa'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 keep a reserve known as an "allowance for loan and lease losses" to deal with problem assets . Comparing the size of that reserve to the total amount of problem loans can be a useful indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on First National Bank, Ames, Iowa'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 may be retained by the bank, expanding its capital cushion, or be used to address problematic loans, potentially making the bank more resilient in times of trouble. Losses, on the other hand, take away from a bank's ability to do those things.

First National Bank, Ames, Iowa scored 18 out of a possible 30 on Bankrate's test of earnings, beating the national average of 15.12.

One widely used measure of a bank's earnings is return on equity, or net income (profit, basically) divided by the total amount of equity. The most recent annualized quarterly return on equity for First National Bank, Ames, Iowa was 9.38 percent, above the national average of 8.10 percent.

The bank recorded net income of $7.2 million on total equity of $76.6 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 0.95 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below 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.