Safe and Sound

The First National Bank of Elmer

Elmer, NJ
3
Star Rating
Elmer, NJ-based The First National Bank of Elmer is an FDIC-insured bank started in 1903. The bank has equity of $23.9 million on assets of $259.3 million, according to December 31, 2017, regulatory filings.

U.S. bank customers have $233.5 million on deposit at 6 offices in NJ run by 73 full-time employees. With that footprint, the bank currently holds loans and leases worth $221.0 million, $200.5 million of which are for real estate.

Overall, Bankrate believes that, as of December 31, 2017, The First National Bank of Elmer exhibited a generally satisfactory condition, earning 3 out of 5 stars for safety and soundness. Here's a breakdown of how the bank did on the three key criteria Bankrate used to grade U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital is an essential measurement of an institution's financial strength. It acts as a cushion against losses and as protection for depositors when a bank is struggling financially. When looking at safety and soundness, more capital is better.

The First National Bank of Elmer received a score of 10 out of a possible 30 points on our test to measure capital adequacy, less than the national average of 13.13.

One essential measure of this buffer is a bank's Tier 1 capital ratio. The First National Bank of Elmer's Tier 1 capital ratio was 11.89 percent, higher than the 6 percent level considered adequate by regulators, but lower than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to financial difficulties.

Overall, The First National Bank of Elmer held equity amounting to 9.23 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to estimate the impact of problem assets, such as unpaid loans, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

A bank with lots of these types of assets could eventually be forced to use capital to cover losses, shrinking its cushion of equity. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, resulting in depressed earnings and potentially more risk of a future failure.

The First National Bank of Elmer came in below the national average of 37.49 on Bankrate's asset quality test, racking up 32 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, 1.87 percent of The First National Bank of Elmer'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 keep a reserve to deal with problem assets known as an "allowance for loan and lease losses." That reserve's size can be a widely used indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on The First National Bank of Elmer's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money affects its safety and soundness. Earnings may be retained by the bank, increasing its capital buffer, or be used to address problematic loans, likely making the bank more resilient in tough times. Banks that are losing money, however, are less able to do those things.

The First National Bank of Elmer scored 12 out of a possible 30 on Bankrate's earnings test, below the national average of 15.12.

One widely used measure of a bank's earnings is return on equity, calculated by dividing net income (profit, basically) by the total amount of equity. The most recent annualized quarterly return on equity for The First National Bank of Elmer was 5.93 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $1.4 million on total equity of $23.9 million. The bank reported an annualized return on average assets, or ROA, of 0.55 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.