Safe and Sound

First National Bank of Clarksdale

Clarksdale, MS
5
Star Rating
Clarksdale, MS-based First National Bank of Clarksdale is an FDIC-insured bank started in 1964. Regulatory filings show the bank having equity of $43.2 million on assets of $367.8 million, as of December 31, 2017.

With 52 full-time employees in 5 offices in MS, the bank currently holds loans and leases worth $236.9 million, including real estate loans of $160.1 million. U.S. bank customers currently have $291.4 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, First National Bank of Clarksdale exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a look at how the bank did on the three key criteria Bankrate used to evaluate U.S. 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 a bank's level of capital is a useful measurement of a bank's financial fortitude. From a safety and soundness perspective, more capital is better.

First National Bank of Clarksdale racked up 14 out of a possible 30 points on our test to measure the adequacy of a bank's capital, beating out the national average of 13.13.

One important measure of this buffer is a bank's Tier 1 capital ratio. First National Bank of Clarksdale's Tier 1 capital ratio was 15.19 percent, higher than the 6 percent level regulators consider adequate, 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 headwinds.

Overall, First National Bank of Clarksdale held equity amounting to 11.73 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to estimate how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by problem assets, such as unpaid loans.

Having lots of these kinds of assets may eventually require a bank to use capital to absorb losses, shrinking its equity cushion. It also means that there are likely to be many assets that are in non-accrual status and no longer earning interest for the bank, resulting in reduced earnings and potentially more risk of a future failure.

On Bankrate's asset quality test, First National Bank of Clarksdale scored 40 out of a possible 40 points, better than the national average of 37.49 points.

A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.08 percent of First National Bank of Clarksdale's loans were noncurrent -- in other words, 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 keep a reserve to handle problem assets known as an "allowance for loan and lease losses." Comparing the reserve's size to the total amount of problem loans can be a widely used indicator when evaluating a bank's ability to manage troubled assets. First National Bank of Clarksdale's loan loss allowance was 1,889.80 percent of its total noncurrent loans, higher than the national average. All else being equal, a higher ratio of loan loss allowance to noncurrent loans is better.

Earnings score

How profitable a bank is has an effect on its long-term survivability. A bank can retain its earnings, expanding its capital buffer, or put them to work addressing problematic loans, likely making the bank more resilient in times of trouble. However, banks that are losing money are less able to do those things.

First National Bank of Clarksdale did above-average on Bankrate's test of earnings, achieving a score of 16 out of a possible 30.

One key way to measure a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by the total amount of equity. The most recent annualized quarterly return on equity for First National Bank of Clarksdale was 7.74 percent, below the national average of 8.10 percent.

The bank recorded net income of $3.4 million on total equity of $43.2 million for the twelve months ended December 31, 2017. The bank had 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.