Safe and Sound

First National Bank of Muscatine

Muscatine, IA
5
Star Rating
Started in 1934, First National Bank of Muscatine is an FDIC-insured bank headquartered in Muscatine, IA. As of December 31, 2017, the bank had equity of $35.3 million on $315.8 million in assets.

Thanks to the work of 67 full-time employees in 3 offices in IA, the bank currently holds loans and leases worth $269.0 million, including real estate loans of $196.7 million. The bank currently holds $266.2 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, First National Bank of Muscatine exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for an analysis of how the bank fared on the three key criteria Bankrate used to grade U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital is a key measurement of an institution's financial resilience. It acts as a bulwark against losses and provides protection for depositors when a bank is struggling financially. When it comes to safety and soundness, the more capital, the better.

First National Bank of Muscatine exceeded the national average of 13.13 points on our test to measure the adequacy of a bank's capital, achieving a score of 14 out of a possible 30 points.

A bank's Tier 1 capital ratio is a widely used measure of this buffer. First National Bank of Muscatine's Tier 1 capital ratio was 13.78 percent, higher than the 6 percent level regulators consider adequate, but under the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather financial difficulties.

Overall, First National Bank of Muscatine held equity amounting to 11.17 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 troubled assets, such as unpaid loans.

A bank with lots of these kinds of assets may eventually have to use capital to absorb losses, cutting down on its equity cushion. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning money, diminishing earnings and elevating the chances of a future failure.

First National Bank of Muscatine scored 40 out of a possible 40 points on Bankrate's test of asset quality, above the national average of 37.49.

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, 0.43 percent of First National Bank of Muscatine'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 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 problem 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 National Bank of Muscatine's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its safety and soundness. Earnings may be retained by the bank, increasing its capital cushion, or be used to address 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.

First National Bank of Muscatine beat the national average on Bankrate's test of earnings, achieving a score of 18 out of a possible 30.

Return on equity, calculated by dividing net income (profit, basically) by the total amount of equity, is one important way to measure a bank's earnings. First National Bank of Muscatine's most recent annualized quarterly return on equity was 8.41 percent, above the national average of 8.10 percent.

The bank recorded net income of $2.9 million on total equity of $35.3 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 0.94 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.