Safe and Sound

First National Bank of Eastern Arkansas

Forrest City, AR
5
Star Rating
Forrest City, AR-based First National Bank of Eastern Arkansas is an FDIC-insured bank started in 1886. As of December 31, 2017, the bank had equity of $41.5 million on assets of $407.2 million.

U.S. bank customers have $363.7 million on deposit at 14 offices in multiple states run by 102 full-time employees. With that footprint, the bank holds loans and leases worth $161.6 million, including $102.2 million worth of real estate loans.

Overall, Bankrate believes that, as of December 31, 2017, First National Bank of Eastern Arkansas exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a look at how the bank fared on the three major criteria Bankrate used to grade 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 buffer against losses and affords protection for account holders during periods of economic instability for the bank. It follows then that a bank's level of capital is an important measurement of an institution's financial fortitude. From a safety and soundness perspective, the more capital, the better.

First National Bank of Eastern Arkansas fell below the national average of 13.13 on our test to measure the adequacy of a bank's capital, achieving a score of 12 out of a possible 30 points.

One essential measure of this buffer is a bank's Tier 1 capital ratio. First National Bank of Eastern Arkansas's Tier 1 capital ratio was 21.17 percent, higher than the 6 percent level regulators consider adequate, but lower than the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather economic difficulties.

Overall, First National Bank of Eastern Arkansas held equity amounting to 10.19 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to determine the impact of troubled assets, such as unpaid mortgages, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

A bank with large numbers of these types of assets may eventually be forced to use capital to cover losses, decreasing 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 increasing the chances of a failure in the future.

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

The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of December 31, 2017, 0.06 percent of First National Bank of Eastern Arkansas'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 keep a reserve to handle problem assets known as an "allowance for loan and lease losses." How large that reserve is can be a helpful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of at-risk loans. First National Bank of Eastern Arkansas's loan loss allowance was 3,637.00 percent of its total noncurrent loans, exceeding the national average. All things being equal, a higher ratio of loan loss allowance to noncurrent loans is better.

Earnings score

How profitable a bank is affects its safety and soundness. A bank can retain its earnings, giving a boost to its capital buffer, or use them to deal with problematic loans, potentially making the bank more resilient in times of trouble. Obviously, banks that are losing money are less able to do those things.

First National Bank of Eastern Arkansas received above-average marks on Bankrate's earnings test, achieving a score of 18 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. First National Bank of Eastern Arkansas's most recent annualized quarterly return on equity was 9.77 percent, above the national average of 8.10 percent.

The bank recorded net income of $4.0 million on total equity of $41.5 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 1.00 percent, right at the level deemed satisfactory in accordance with industry standards, and equal to 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.