Safe and Sound

First Naturalstate Bank

Mcgehee, AR
4
Star Rating
First Naturalstate Bank is a Mcgehee, AR-based, FDIC-insured bank dating back to 1974. The bank has equity of $5.9 million on assets of $51.1 million, according to December 31, 2017, regulatory filings.

U.S. bank customers have $43.6 million on deposit at 2 offices in AR run by 17 full-time employees. With that footprint, the bank has amassed loans and leases worth $29.3 million, $18.3 million of which are for real estate.

Overall, Bankrate believes that, as of December 31, 2017, First Naturalstate Bank exhibited a good condition, earning 4 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 evaluate American banks.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial resilience, capital is crucial. It works as a buffer against losses and provides protection for depositors during periods of economic instability for the bank. From a safety and soundness perspective, the higher the capital, the better.

First Naturalstate Bank exceeded the national average of 13.13 points on our test to measure the adequacy of a bank's capital, receiving a score of 14 out of a possible 30 points.

A bank's Tier 1 capital ratio is an important measure of this buffer. First Naturalstate Bank's Tier 1 capital ratio was 17.33 percent, higher than the 6 percent level regulators consider adequate, but under the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather economic headwinds.

Overall, First Naturalstate Bank held equity amounting to 11.52 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

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

Having a large number of these types of assets may eventually force a bank to use capital to cover losses, shrinking its buffer of equity. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning money, diminishing earnings and increasing the risk of a future failure.

First Naturalstate Bank scored above the national average of 37.49 on Bankrate's test of asset quality, racking up 40 out of a possible 40 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, 0.68 percent of First Naturalstate Bank'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 maintain a reserve known as an "allowance for loan and lease losses" to deal with problem assets . The size of that reserve can be a helpful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on First Naturalstate Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its long-term survivability. Earnings can be retained by the bank, increasing its capital cushion, or be used to address problematic loans, likely making the bank better prepared to withstand financial trouble. Obviously, banks that are losing money are less able to do those things.

On Bankrate's earnings test, First Naturalstate Bank scored 8 out of a possible 30, below the national average of 15.12.

Return on equity, calculated by dividing net income (profit, basically) by the total amount of equity, is one important measure of a bank's earnings. First Naturalstate Bank's most recent annualized quarterly return on equity was 3.29 percent, below the national average of 8.10 percent.

The bank reported net income of $198,000 on total equity of $5.9 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 0.38 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.