Safe and Sound

Freedom National Bank

Greenville, RI
3
Star Rating
Founded in 2001, Freedom National Bank is an FDIC-insured bank headquartered in Greenville, RI. As of June 30, 2017, the bank had equity of $11.8 million on $117,404,000 in assets.

Thanks to the efforts of 21 full-time employees in 2 offices in RI, the bank has amassed loans and leases worth $93.8 million, including $76.2 million worth of real estate loans. The bank currently holds $93.0 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of June 30, 2017, Freedom National Bank exhibited a generally satisfactory condition, earning 3 out of 5 stars for safety and soundness. Here's a look at how the bank did on the three key criteria Bankrate used to grade American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a bulwark against losses and affords protection for accountholders during times of economic instability for the bank. It follows then that 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, Freedom National Bank received a score of 12 out of a possible 30 points, falling short of the national average of 13.38.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Freedom National Bank's Tier 1 capital ratio was 13.56 percent, above the 6 percent level considered adequate by regulators, but under the national average of 25.16 percent. A higher capital ratio suggests the bank will be better able to weather financial challenges.

Overall, Freedom National Bank held equity amounting to 10.04 percent of its assets, which was lower than the national average of 12.10 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 a large number of these types of assets may eventually have to use capital to absorb losses, reducing its buffer of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning interest for the bank, pushing down earnings and elevating the risk of a failure in the future.

Freedom National Bank beat out the national average of 37.62 on Bankrate's test of asset quality, racking up 40 out of a possible 40 points .

A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of June 30, 2017, 0.01 percent of Freedom 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 maintain a reserve known as an "allowance for loan and lease losses" to deal with problem assets . 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 problematic loans. Freedom National Bank's loan loss allowance was 8,536.36 percent of its total noncurrent loans, higher than the national average. All else being equal, the higher the ratio of loan loss allowance to noncurrent loans, the better.

Earnings score

A bank's profitability has an effect on its safety and soundness. 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 times of trouble. Conversely, losses take away from a bank's ability to do those things.

Freedom National Bank underperformed the average on Bankrate's earnings test, achieving a score of 2 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. Freedom National Bank's most recent annualized quarterly return on equity was 0.80 percent, below the national average of 9.28 percent.

For the twelve months ended June 30, 2017, the bank earned net income of $47,000 on total equity of $11.8 million. The bank reported an annualized return on average assets, or ROA, of 0.09 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below 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.