Safe and Sound

River Town Bank

Dardanelle, AR
3
Star Rating
River Town Bank is a Dardanelle, AR-based, FDIC-insured bank that opened its doors in 1934. Regulatory filings show the bank having equity of $16.7 million on assets of $133.6 million, as of December 31, 2017.

Thanks to the work of 52 full-time employees in 8 offices in AR, the bank has amassed loans and leases worth $91.3 million, including $85.0 million worth of real estate loans. U.S. bank customers currently have $114.0 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, River Town Bank exhibited a generally satisfactory condition, earning 3 out of 5 stars for safety and soundness. Keep reading for a look at how the bank did on the three important criteria Bankrate used to grade American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a cushion against losses and provides protection for depositors during times of financial trouble for the bank. It follows then that a bank's level of capital is a useful measurement of an institution's financial strength. From a safety and soundness perspective, the more capital, the better.

River Town Bank scored 16 out of a possible 30 points on our test to measure capital adequacy, better than the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. River Town Bank's Tier 1 capital ratio was 19.32 percent, above the 6 percent level regulators consider adequate, but below the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather financial downturns.

Overall, River Town Bank held equity amounting to 12.53 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to estimate the effect of problem assets, such as past-due mortgages, on the bank's capitalization and allocated loan loss reserves.

A bank with extensive holdings of these types of assets could eventually have to use capital to cover losses, diminishing its cushion of equity. Many of those assets are also likely to be in non-accrual status and no longer earning money, diminishing earnings and elevating the chances of a future failure.

River Town Bank scored 32 out of a possible 40 points on Bankrate's test of asset quality, less than the national average of 37.49.

A helpful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 2.37 percent of River Town Bank'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." The size of that reserve can be a helpful 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 River Town Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability has an effect on its safety and soundness. Earnings may be retained by the bank, expanding its capital cushion, or be used to address problematic loans, potentially making the bank better able to withstand economic trouble. Banks that are losing money, however, have less ability to do those things.

River Town Bank fell short of the national average on Bankrate's earnings test, achieving a score of 2 out of a possible 30.

One widely used way to measure a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by total equity. The most recent annualized quarterly return on equity for River Town Bank was 0.63 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $106,000 on total equity of $16.7 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.