Safe and Sound

The First National Bank of Primghar

Primghar, IA
5
Star Rating
The First National Bank of Primghar is an FDIC-insured bank founded in 1889 and currently based in Primghar, IA. As of December 31, 2017, the bank had equity of $5.5 million on $32.0 million in assets.

Thanks to the efforts of 7 full-time employees, the bank has amassed loans and leases worth $20.2 million, including real estate loans of $14.2 million. The bank currently holds $26.2 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, The First National Bank of Primghar 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 key criteria Bankrate used to grade American banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial stability, capital is crucial. It acts as a bulwark against losses and as protection for depositors when a bank is struggling financially. When it comes to safety and soundness, the more capital, the better.

On our test to measure capital adequacy, The First National Bank of Primghar racked up 26 out of a possible 30 points, beating the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. The First National Bank of Primghar's Tier 1 capital ratio was 23.36 percent, above the 6 percent level regulators consider adequate, but under the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to financial headwinds.

Overall, The First National Bank of Primghar held equity amounting to 17.12 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test is intended to estimate how the bank's capitalization and allocated loan loss reserves could be affected by problem assets, such as unpaid loans.

Having large numbers of these types of assets means a bank could have to use capital to cover losses, diminishing its equity buffer. 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 future failure.

The First National Bank of Primghar scored 40 out of a possible 40 points on Bankrate's asset quality test, better than the national average of 37.49.

The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of December 31, 2017, none of The First National Bank of Primghar'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 keep a reserve known as an "allowance for loan and lease losses" to deal with problem assets . That reserve's size can be a handy 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 Primghar's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its long-term survivability. Earnings may be retained by the bank, boosting its capital cushion, or be used to deal with problematic loans, potentially making the bank more resilient in tough times. Losses, on the other hand, take away from a bank's ability to do those things.

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

One important way to measure a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by total equity. The First National Bank of Primghar's most recent annualized quarterly return on equity was 3.71 percent, below the national average of 8.10 percent.

The bank recorded net income of $202,000 on total equity of $5.5 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.64 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.