Safe and Sound

First National Bank

Arcadia, LA
5
Star Rating
Arcadia, LA-based First National Bank is an FDIC-insured bank started in 1935. The bank has equity of $20.5 million on assets of $252.5 million, according to June 30, 2017, regulatory filings.

U.S. bank customers have $219.8 million on deposit at 9 offices in LA run by 74 full-time employees. With that footprint, the bank holds loans and leases worth $214.1 million, including $191.3 million worth of real estate loans.

Overall, Bankrate believes that, as of June 30, 2017, First National Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for an analysis of how the bank faired on the three major criteria Bankrate used to evaluate U.S. banks on safety and soundness.

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SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a cushion against losses and affords protection for depositors when a bank is experiencing economic instability. Therefore, when it comes to measuring an an institution's financial stability, capital is useful. From a safety and soundness perspective, more capital is preferred.
On our test to measure capital adequacy, First National Bank received a score of 8 out of a possible 30 points, coming in below the national average of 13.38.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. First National Bank's Tier 1 capital ratio was 9.27 percent, above the 6 percent level regulators consider adequate, but less than the national average of 25.16 percent. The higher the capital ratio, the better the bank will be able to weather economic headwinds.

Overall, First National Bank held equity amounting to 8.12 percent of its assets, which was lower than the national average of 12.10 percent.

Asset Quality Score

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

Having large numbers of these types of assets suggests a bank could eventually have to use capital to absorb losses, cutting down on its buffer of equity. Many of those assets are also likely to be in non-accrual status and no longer earning money, resulting in reduced earnings and potentially more risk of a future failure.

First National Bank scored 40 out of a possible 40 points on Bankrate's test of asset quality, exceeding the national average of 37.62.

The percentage of problem assets a bank holds compared to its total assets is a useful indicator of asset quality.As of June 30, 2017, 0.52 percent of First National Bank'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 1.04 percent.

Banks keep a reserve known as an "allowance for loan and lease losses" to deal with problem assets . Comparing the how large that reserve is to the total amount of problematic loans can be a useful indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on First National Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its long-term survivability. Earnings can be retained by the bank, increasing its capital buffer, or be used to deal with problematic loans, potentially making the bank better prepared to withstand financial shocks. However, banks that are losing money are less able to do those things.

First National Bank scored 30 out of a possible 30 on Bankrate's earnings test, better than the national average of 16.52.

One important measure of a bank's earnings is return on equity, or net income (profit, essentially) divided by the total amount of equity. The most recent annualized quarterly return on equity for First National Bank was 22.08 percent, above the national average of 9.28 percent.

For the twelve months ended June 30, 2017, the bank earned net income of $2.2 million on total equity of $20.5 million. The bank reported an annualized return on average assets, or ROA, of 1.75 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above the average for U.S. banks of 1.14 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.