Safe and Sound

First National Bank

Waverly, IA
5
Star Rating
Founded in 1864, First National Bank is an FDIC-insured bank based in Waverly, IA. The bank has equity of $48.8 million on assets of $365.5 million, according to December 31, 2017, regulatory filings.

U.S. bank customers have $302.6 million on deposit at 6 offices in IA run by 67 full-time employees. With that footprint, the bank has amassed loans and leases worth $298.6 million, $197.1 million of which are for real estate.

Overall, Bankrate believes that, as of December 31, 2017, First National Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's an analysis of how the bank did on the three important criteria Bankrate used to evaluate American banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

Capital is a crucial measurement of a bank's financial resilience. It works as a cushion against losses and affords protection for accountholders when a bank is experiencing financial instability. From a safety and soundness perspective, the higher the capital, the better.

On our test to measure the adequacy of a bank's capital, First National Bank racked up 16 out of a possible 30 points, exceeding the national average of 13.13.

One essential measure of this buffer is a bank's Tier 1 capital ratio. First National Bank's Tier 1 capital ratio was 15.84 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 economic downturns.

Overall, First National Bank held equity amounting to 13.35 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to try to understand how the bank's capitalization and allocated loan loss reserves could be affected by troubled assets, such as unpaid loans.

A bank with a large number of these types of assets could eventually have to use capital to cover losses, cutting down on 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, pushing down earnings and elevating the risk of a future failure.

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

The percentage of problem assets a bank holds compared to its total assets is a widely used indicator of asset quality.As of December 31, 2017, 0.57 percent of First National 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 known as an "allowance for loan and lease losses" to deal with problem assets . Comparing how large that reserve is to the total amount of problem 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 National Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money affects its long-term survivability. Earnings may be retained by the bank, boosting its capital buffer, or be used to address problematic loans, potentially making the bank better able to withstand economic shocks. Conversely, losses take away from a bank's ability to do those things.

First National Bank scored 14 out of a possible 30 on Bankrate's test of earnings, falling short of the national average of 15.12.

Return on equity, calculated by dividing net income (profit, essentially) by total equity, is one important measure of a bank's earnings. The most recent annualized quarterly return on equity for First National Bank was 6.90 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $3.3 million on total equity of $48.8 million. The bank experienced an annualized return on average assets, or ROA, of 0.89 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.