Safe and Sound

Bank of Gravett

Gravette, AR
5
Star Rating
Bank of Gravett is a Gravette, AR-based, FDIC-insured bank founded in 1898. Regulatory filings show the bank having equity of $16.5 million on assets of $114.1 million, as of December 31, 2017.

Thanks to the efforts of 41 full-time employees in 4 offices in AR, the bank holds loans and leases worth $73.8 million, including $65.4 million worth of real estate loans. U.S. bank customers currently have $97.4 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Bank of Gravett exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a look at how the bank fared on the three key criteria Bankrate used to grade American banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a cushion against losses and as protection for account holders when a bank is struggling financially. It follows then that when it comes to measuring an an institution's financial resilience, capital is valuable. When looking at safety and soundness, the higher the capital, the better.

On our test to measure capital adequacy, Bank of Gravett racked up 20 out of a possible 30 points, better than the national average of 13.13.

One widely used measure of this buffer is a bank's Tier 1 capital ratio. Bank of Gravett's Tier 1 capital ratio was 21.76 percent, exceeding the 6 percent level considered adequate by regulators, but under the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather economic difficulties.

Overall, Bank of Gravett held equity amounting to 14.46 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to estimate the impact of problem 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 be required to use capital to absorb losses, cutting down on its cushion of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning interest for the bank, resulting in reduced earnings and potentially more risk of a failure in the future.

Bank of Gravett scored 36 out of a possible 40 points on Bankrate's asset quality test, less than the national average of 37.49.

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, 0.50 percent of Bank of Gravett'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 maintain a reserve known as an "allowance for loan and lease losses" to deal with problem assets . Comparing the reserve's size to the total amount of problem loans can be a handy indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Bank of Gravett's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability affects its safety and soundness. A bank can retain its earnings, expanding its capital buffer, or put them to work addressing problematic loans, likely making the bank better able to withstand financial shocks. Conversely, losses lessen a bank's ability to do those things.

Bank of Gravett did below-average on Bankrate's test of earnings, achieving a score of 14 out of a possible 30.

Return on equity, calculated by dividing net income (profit, essentially) by total equity, is one important way to measure a bank's earnings. Bank of Gravett's most recent annualized quarterly return on equity was 6.29 percent, below the national average of 8.10 percent.

The bank earned net income of $1.0 million on total equity of $16.5 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.89 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.