Safe and Sound

FNNB Bank

Newton, IA
3
Star Rating
Newton, IA-based FNNB Bank is an FDIC-insured bank founded in 1932. The bank holds equity of $6.7 million on $83.4 million in assets, according to December 31, 2017, regulatory filings.

U.S. bank customers have $73.9 million on deposit at 2 offices in IA run by 19 full-time employees. With that footprint, the bank currently holds loans and leases worth $50.6 million, including real estate loans of $35.8 million.

Overall, Bankrate believes that, as of December 31, 2017, FNNB Bank exhibited a generally satisfactory condition, earning 3 out of 5 stars for safety and soundness. Keep reading for a breakdown of how the bank did on the three major criteria Bankrate used to score U.S. banks.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a bulwark against losses and as protection for depositors during periods of financial trouble for the bank. It follows then that a bank's level of capital is a crucial measurement of a bank's financial resilience. When it comes to safety and soundness, more capital is preferred.

On our test to measure capital adequacy, FNNB Bank received a score of 8 out of a possible 30 points, lower than the national average of 13.13.

One commonly used measure of this buffer is a bank's Tier 1 capital ratio. FNNB Bank's Tier 1 capital ratio was 12.03 percent, above the 6 percent level considered adequate by regulators, but less than the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather economic challenges.

Overall, FNNB Bank held equity amounting to 8.05 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to estimate the effect of troubled assets, such as past-due loans, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

A bank with large numbers of these kinds of assets could eventually have to use capital to absorb losses, cutting down on its buffer of equity. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning money, resulting in diminished earnings and potentially more risk of a failure in the future.

FNNB Bank scored 36 out of a possible 40 points on Bankrate's test of asset quality, coming in below 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, 1.13 percent of FNNB Bank's loans were noncurrent -- in other words, they were more than 90 days past due or were in non-accrual status. That's above the national average of 1.01 percent.

Banks maintain a reserve to handle problem assets known as an "allowance for loan and lease losses." Comparing how large that reserve is to the total amount of at-risk loans can be a widely used indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on FNNB Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability affects its safety and soundness. Earnings may be retained by the bank, giving a boost to its capital cushion, or be used to address problematic loans, potentially making the bank more resilient in times of trouble. Conversely, losses take away from a bank's ability to do those things.

FNNB Bank underperformed the average on Bankrate's test of earnings, achieving a score of 8 out of a possible 30.

Return on equity, calculated by dividing net income (essentially, profit) by the total amount of equity, is one key measure of a bank's earnings. FNNB Bank's most recent annualized quarterly return on equity was 3.82 percent, below the national average of 8.10 percent.

The bank reported net income of $261,000 on total equity of $6.7 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 0.32 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.