Safe and Sound

The First National Bank in Creston

Creston, IA
5
Star Rating
Creston, IA-based The First National Bank in Creston is an FDIC-insured bank founded in 1871. The bank holds equity of $22.9 million on assets of $240.6 million, according to December 31, 2017, regulatory filings.

With 61 full-time employees in 3 offices in IA, the bank holds loans and leases worth $189.6 million, including real estate loans of $117.9 million. U.S. bank customers currently have $213.5 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, The First National Bank in Creston exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a breakdown of how the bank fared on the three major criteria Bankrate used to score American banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a buffer against losses and affords protection for account holders during periods of financial instability for the bank. Therefore, when it comes to measuring an an institution's financial stability, capital is crucial. From a safety and soundness perspective, the more capital, the better.

The First National Bank in Creston fell short of the national average of 13.13 on our test to measure capital adequacy, receiving a score of 10 out of a possible 30 points.

One widely used measure of this buffer is a bank's Tier 1 capital ratio. The First National Bank in Creston's Tier 1 capital ratio was 12.31 percent, exceeding the 6 percent level considered adequate by regulators, but less than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to economic difficulties.

Overall, The First National Bank in Creston held equity amounting to 9.51 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 impact of troubled assets, such as past-due mortgages, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

A bank with large numbers of these types of assets may eventually be required to use capital to cover losses, reducing its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and no longer earning interest for the bank, resulting in lower earnings and potentially more risk of a future failure.

The First National Bank in Creston beat out the national average of 37.49 on Bankrate's test of asset quality, racking up 40 out of a possible 40 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, 0.04 percent of The First National Bank in Creston'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 reserve's size to the total amount of problem loans can be a handy indicator when evaluating a bank's ability to manage troubled assets. The First National Bank in Creston's loan loss allowance was 3,480.25 percent of its total noncurrent loans, higher than the national average. All things being equal, the higher the ratio of loan loss allowance to noncurrent loans, the better.

Earnings score

How profitable a bank is affects its long-term survivability. A bank can retain its earnings, increasing its capital buffer, or use them to deal with problematic loans, potentially making the bank more resilient in times of trouble. Banks that are losing money, however, are less able to do those things.

The First National Bank in Creston received above-average marks on Bankrate's test of earnings, achieving a score of 24 out of a possible 30.

Return on equity, calculated by dividing net income (essentially, profit) by total equity, is one important measure of a bank's earnings. The most recent annualized quarterly return on equity for The First National Bank in Creston was 16.16 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $3.6 million on total equity of $22.9 million. The bank had an annualized return on average assets, or ROA, of 1.51 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.