Safe and Sound

Primebank

Le Mars, IA
5
Star Rating
Started in 1901, Primebank is an FDIC-insured bank based in Le Mars, IA. As of December 31, 2017, the bank held equity of $48.8 million on assets of $423.5 million.

Thanks to the work of 80 full-time employees in 3 offices in IA, the bank has amassed loans and leases worth $362.2 million, $247.6 million of which are for real estate. U.S. bank customers currently have $367.7 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Primebank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's an analysis of how the bank fared 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 works as a buffer against losses and as protection for account holders during periods of financial instability for the bank. Therefore, when it comes to measuring an a bank's financial strength, capital is essential. When looking at safety and soundness, the higher the capital, the better.

Primebank scored above the national average of 13.13 points on our test to measure capital adequacy, achieving a score of 14 out of a possible 30 points.

A bank's Tier 1 capital ratio is an essential measure of this buffer. Primebank's Tier 1 capital ratio was 13.49 percent, higher than the 6 percent level considered adequate by regulators, but below the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather financial challenges.

Overall, Primebank held equity amounting to 11.53 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to determine the impact of problem assets, such as past-due loans, on the bank's loan loss reserves and overall capitalization.

A bank with lots of these kinds of assets could eventually have to use capital to cover losses, shrinking 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, resulting in depressed earnings and potentially more risk of a future failure.

Primebank did better than the national average of 37.49 on Bankrate's test of asset quality, racking up 40 out of a possible 40 points .

A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.41 percent of Primebank'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 problem 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 useful indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Primebank's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance affects its long-term survivability. A bank can retain its earnings, boosting its capital cushion, or use them to address problematic loans, potentially making the bank more resilient in times of trouble. Conversely, losses diminish a bank's ability to do those things.

Primebank did above-average on Bankrate's test of earnings, achieving a score of 24 out of a possible 30.

Return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity, is one key measure of a bank's earnings. The most recent annualized quarterly return on equity for Primebank was 15.74 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $7.4 million on total equity of $48.8 million. The bank had an annualized return on average assets, or ROA, of 1.83 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.