Safe and Sound

First State Bank of Warren

3
Star Rating
Warren, AR-based First State Bank of Warren is an FDIC-insured bank founded in 1890. Regulatory filings show the bank having equity of $11.2 million on assets of $112.3 million, as of December 31, 2017.

U.S. bank customers have $98.8 million on deposit at 4 offices in AR run by 29 full-time employees. With that footprint, the bank currently holds loans and leases worth $44.0 million, including real estate loans of $26.1 million.

Overall, Bankrate believes that, as of December 31, 2017, First State Bank of Warren exhibited a generally satisfactory condition, earning 3 out of 5 stars for safety and soundness. Here's a look at how the bank did on the three key criteria Bankrate used to score U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial resilience, capital is useful. It works as a buffer against losses and as protection for accountholders when a bank is struggling financially. When looking at safety and soundness, the higher the capital, the better.

On our test to measure the adequacy of a bank's capital, First State Bank of Warren received a score of 10 out of a possible 30 points, less than the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. First State Bank of Warren's Tier 1 capital ratio was 17.87 percent, exceeding the 6 percent level regulators consider adequate, 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 headwinds.

Overall, First State Bank of Warren held equity amounting to 10.00 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 troubled assets, such as unpaid mortgages.

A bank with a large number of these kinds of assets may eventually be required to use capital to cover losses, diminishing its equity cushion. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning interest for the bank, resulting in reduced earnings and potentially more risk of a future failure.

First State Bank of Warren scored 36 out of a possible 40 points on Bankrate's test of asset quality, failing to reach 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, 1.88 percent of First State Bank of Warren'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 maintain a reserve to deal with troubled assets known as an "allowance for loan and lease losses." 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 problematic loans. Unfortunately, the FDIC did not provide information on First State Bank of Warren's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money has an effect on its long-term survivability. Earnings may be retained by the bank, increasing its capital buffer, or be used to address problematic loans, likely making the bank more resilient in times of trouble. Banks that are losing money, however, have less ability to do those things.

On Bankrate's earnings test, First State Bank of Warren scored 6 out of a possible 30, below the national average of 15.12.

One important way to measure a bank's earnings is return on equity, or net income (profit, basically) divided by total equity. The most recent annualized quarterly return on equity for First State Bank of Warren was 2.78 percent, below the national average of 8.10 percent.

The bank earned net income of $327,000 on total equity of $11.2 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.29 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.