Safe and Sound

First Community Bank of Eastern Arkansas

Marion, AR
5
Star Rating
Started in 1998, First Community Bank of Eastern Arkansas is an FDIC-insured bank based in Marion, AR. As of December 31, 2017, the bank had equity of $21.2 million on assets of $151.3 million.

U.S. bank customers have $128.8 million on deposit at 2 offices in AR run by 27 full-time employees. With that footprint, the bank has amassed loans and leases worth $97.9 million, $83.6 million of which are for real estate.

Overall, Bankrate believes that, as of December 31, 2017, First Community Bank of Eastern Arkansas exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's an analysis of how the bank fared on the three key criteria Bankrate used to score American banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a bulwark against losses and affords protection for account holders during times of economic instability for the bank. Therefore, when it comes to measuring an an institution's financial stability, capital is essential. From a safety and soundness perspective, more capital is better.

First Community Bank of Eastern Arkansas scored 20 out of a possible 30 points on our test to measure capital adequacy, beating out the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. First Community Bank of Eastern Arkansas's Tier 1 capital ratio was 19.33 percent, higher than the 6 percent level considered adequate by regulators, but lower than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to economic difficulties.

Overall, First Community Bank of Eastern Arkansas held equity amounting to 14.02 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

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

A bank with large numbers of these kinds of assets may eventually have to use capital to absorb losses, shrinking its cushion of equity. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, pushing down earnings and elevating the risk of a failure in the future.

On Bankrate's asset quality test, First Community Bank of Eastern Arkansas scored 36 out of a possible 40 points, coming in below the national average of 37.49 points.

A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 2.43 percent of First Community Bank of Eastern Arkansas'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 known as an "allowance for loan and lease losses" to deal with problem assets . Comparing the size of that reserve to the total amount of problematic loans can be a useful indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on First Community Bank of Eastern Arkansas's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its safety and soundness. Earnings can be retained by the bank, increasing its capital buffer, or be used to deal with problematic loans, potentially making the bank better able to withstand economic trouble. Conversely, losses diminish a bank's ability to do those things.

First Community Bank of Eastern Arkansas scored 14 out of a possible 30 on Bankrate's test of earnings, falling short of the national average of 15.12.

One important way to measure a bank's earnings is return on equity, or net income (essentially profit) divided by total equity. The most recent annualized quarterly return on equity for First Community Bank of Eastern Arkansas was 6.21 percent, below the national average of 8.10 percent.

The bank reported net income of $1.3 million on total equity of $21.2 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 0.85 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.