Safe and Sound

First National Bank of North Arkansas

Berryville, AR
5
Star Rating
First National Bank of North Arkansas is a Berryville, AR-based, FDIC-insured bank that opened its doors in 1889. As of December 31, 2017, the bank had equity of $21.2 million on $188.2 million in assets.

With 90 full-time employees in 11 offices in AR, the bank has amassed loans and leases worth $156.0 million, including real estate loans of $112.3 million. U.S. bank customers currently have $165.1 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, First National Bank of North Arkansas exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for an analysis of how the bank fared on the three major criteria Bankrate used to evaluate American banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

Capital is an essential measurement of an institution's financial strength. It works as a buffer against losses and as protection for accountholders when a bank is experiencing economic trouble. From a safety and soundness perspective, more capital is preferred.

On our test to measure capital adequacy, First National Bank of North Arkansas achieved a score of 14 out of a possible 30 points, above the national average of 13.13.

A bank's Tier 1 capital ratio is a commonly used measure of this buffer. First National Bank of North Arkansas's Tier 1 capital ratio was 14.77 percent, exceeding the 6 percent level considered adequate by regulators, but less than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to financial downturns.

Overall, First National Bank of North Arkansas held equity amounting to 11.27 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 impact of troubled assets, such as past-due mortgages, on the bank's loan loss reserves and overall capitalization.

Having large numbers of these kinds of assets suggests a bank may have to use capital to cover losses, decreasing 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, decreasing earnings and elevating the risk of a future failure.

On Bankrate's asset quality test, First National Bank of North Arkansas scored 36 out of a possible 40 points, lower than the national average of 37.49 points.

The percentage of problem assets a bank holds compared to its total assets is a widely used indicator of asset quality.As of December 31, 2017, 1.51 percent of First National Bank of North Arkansas's loans were noncurrent, meaning 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 troubled assets . That reserve's size can be a handy indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on First National Bank of North Arkansas's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its long-term survivability. Earnings may be retained by the bank, giving a boost to its capital buffer, or be used to deal with problematic loans, likely making the bank better able to withstand financial shocks. Obviously, banks that are losing money have less ability to do those things.

On Bankrate's test of earnings, First National Bank of North Arkansas scored 22 out of a possible 30, beating the national average of 15.12.

Return on equity, calculated by dividing net income (essentially, profit) by total equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for First National Bank of North Arkansas was 12.77 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $2.7 million on total equity of $21.2 million. The bank experienced an annualized return on average assets, or ROA, of 1.41 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above 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.