Safe and Sound

The First National Bank of Johnson

Johnson, NE
5
Star Rating
The First National Bank of Johnson is a Johnson, NE-based, FDIC-insured bank that opened its doors in 1906. The bank holds equity of $14.0 million on $73.0 million in assets, according to December 31, 2017, regulatory filings.

Thanks to the efforts of 12 full-time employees in 2 offices in NE, the bank has amassed loans and leases worth $23.4 million, including $13.2 million worth of real estate loans. The bank currently holds $56.7 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, The First National Bank of Johnson exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for an analysis 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 cushion against losses and provides protection for account holders when a bank is struggling financially. Therefore, a bank's level of capital is a key measurement of an institution's financial strength. When looking at safety and soundness, the higher the capital, the better.

On our test to measure capital adequacy, The First National Bank of Johnson racked up 28 out of a possible 30 points, better than the national average of 13.13.

A bank's Tier 1 capital ratio is an important measure of this buffer. The First National Bank of Johnson's Tier 1 capital ratio was 38.04 percent, exceeding the 6 percent level considered adequate by regulators, and higher than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather financial headwinds.

Overall, The First National Bank of Johnson held equity amounting to 19.24 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to determine the impact of troubled assets, such as unpaid loans, on the bank's loan loss reserves and overall capitalization.

A bank with large numbers of these types of assets could eventually have to use capital to cover losses, decreasing its buffer of equity. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, resulting in depressed earnings and potentially more risk of a failure in the future.

The First National Bank of Johnson beat out the national average of 37.49 on Bankrate's asset quality test, 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, 0.24 percent of The First National Bank of Johnson'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 to deal with troubled 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 Johnson's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its safety and soundness. A bank can retain its earnings, expanding its capital buffer, or put them to work addressing 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 of Johnson fell short of the national average on Bankrate's test of earnings, achieving a score of 4 out of a possible 30.

Return on equity, calculated by dividing net income (profit, basically) by the total amount of equity, is one important measure of a bank's earnings. The most recent annualized quarterly return on equity for The First National Bank of Johnson was 1.37 percent, below the national average of 8.10 percent.

The bank recorded net income of $192,000 on total equity of $14.0 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 0.27 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.