Safe and Sound

Bank of Little Rock

Little Rock, AR
3
Star Rating
Started in 1927, Bank of Little Rock is an FDIC-insured bank headquartered in Little Rock, AR. The bank has equity of $21.7 million on assets of $205.2 million, according to December 31, 2017, regulatory filings.

With 117 full-time employees in 5 offices in AR, the bank currently holds loans and leases worth $108.0 million, including real estate loans of $66.9 million. U.S. bank customers currently have $182.4 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Bank of Little Rock exhibited a generally satisfactory condition, earning 3 out of 5 stars for safety and soundness. Here's a breakdown of how the bank fared on the three major 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 provides protection for depositors during periods of financial instability for the bank. It follows then that when it comes to measuring an an institution's financial resilience, capital is crucial. From a safety and soundness perspective, the more capital, the better.

On our test to measure the adequacy of a bank's capital, Bank of Little Rock received a score of 12 out of a possible 30 points, below the national average of 13.13.

One important measure of this buffer is a bank's Tier 1 capital ratio. Bank of Little Rock's Tier 1 capital ratio was 16.47 percent, higher than the 6 percent level considered adequate by regulators, but below the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather economic downturns.

Overall, Bank of Little Rock held equity amounting to 10.57 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

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

A bank with lots of these kinds of assets could eventually have to use capital to absorb losses, cutting down on its equity cushion. 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 future failure.

Bank of Little Rock scored 36 out of a possible 40 points on Bankrate's asset quality test, coming in below the national average of 37.49.

The percentage of problem assets a bank holds compared to its total assets is a handy indicator of asset quality.As of December 31, 2017, 1.71 percent of Bank of Little Rock's loans were noncurrent -- in other words, they were more than 90 days past due or were in non-accrual status. That's above the national average of 1.01 percent.

Banks keep a reserve to handle troubled assets known as an "allowance for loan and lease losses." The size of that reserve can be a useful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on Bank of Little Rock's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its safety and soundness. A bank can retain its earnings, boosting its capital buffer, or put them to work addressing problematic loans, likely making the bank better prepared to withstand economic shocks. However, banks that are losing money are less able to do those things.

Bank of Little Rock scored 4 out of a possible 30 on Bankrate's test of earnings, less than the national average of 15.12.

One key measure of a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by total equity. The most recent annualized quarterly return on equity for Bank of Little Rock was 1.13 percent, below the national average of 8.10 percent.

The bank earned net income of $248,000 on total equity of $21.7 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 0.12 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.