Safe and Sound

Freedom National Bank

Greenville, RI
3
Star Rating
Greenville, RI-based Freedom National Bank is an FDIC-insured bank started in 2001. The bank has equity of $11.6 million on $115.1 million in assets, according to December 31, 2017, regulatory filings.

With 21 full-time employees in 2 offices in RI, the bank has amassed loans and leases worth $96.1 million, including real estate loans of $79.7 million. U.S. bank customers currently have $90.6 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Freedom National Bank exhibited a generally satisfactory condition, earning 3 out of 5 stars for safety and soundness. Here's a breakdown of how the bank did on the three key criteria Bankrate used to evaluate American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a buffer against losses and provides protection for account holders when a bank is struggling financially. Therefore, a bank's level of capital is a crucial measurement of a bank's financial fortitude. From a safety and soundness perspective, the more capital, the better.

Freedom National Bank received a score of 12 out of a possible 30 points on our test to measure the adequacy of a bank's capital, less than the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Freedom National Bank's Tier 1 capital ratio was 13.46 percent, higher than the 6 percent level regulators consider adequate, but less than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to financial challenges.

Overall, Freedom National Bank held equity amounting to 10.07 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to try to understand how the bank's loan loss reserves and overall capitalization could be affected by problem assets, such as unpaid mortgages.

Having lots of these kinds of assets means a bank may eventually have to use capital to cover losses, cutting down on its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, resulting in diminished earnings and potentially more risk of a failure in the future.

On Bankrate's test of asset quality, Freedom National Bank scored 40 out of a possible 40 points, beating out 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, 0.01 percent of Freedom National 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 troubled assets . How large that reserve is can be a widely used indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of at-risk loans. Freedom National Bank's loan loss allowance was 9,470.00 percent of its total noncurrent loans, exceeding the national average. All things being equal, the higher the ratio of loan loss allowance to noncurrent loans, the 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 cushion, or use them to deal with problematic loans, potentially making the bank more resilient in tough times. Banks that are losing money, however, have less ability to do those things.

Freedom National Bank underperformed the average on Bankrate's test of earnings, achieving a score of 2 out of a possible 30.

One key measure of a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by the total amount of equity. Freedom National Bank's most recent annualized quarterly return on equity was 0.75 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $88,000 on total equity of $11.6 million. The bank had an annualized return on average assets, or ROA, of 0.08 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.