Safe and Sound

The First National Bank of Anderson

Anderson, TX
4
Star Rating
Anderson, TX-based The First National Bank of Anderson is an FDIC-insured bank started in 1904. Regulatory filings show the bank having equity of $17.7 million on $183.4 million in assets, as of December 31, 2017.

Thanks to the work of 42 full-time employees in 2 offices in TX, the bank holds loans and leases worth $112.9 million, including $82.5 million worth of real estate loans. The bank currently holds $165.5 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, The First National Bank of Anderson 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 key criteria Bankrate used to score American banks.

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THE INSTITUTION'S SCORE

Capital Score

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

On our test to measure capital adequacy, The First National Bank of Anderson received a score of 10 out of a possible 30 points, lower than the national average of 13.13.

One widely used measure of this buffer is a bank's Tier 1 capital ratio. The First National Bank of Anderson's Tier 1 capital ratio was 14.92 percent, above the 6 percent level regulators consider adequate, but below the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to economic challenges.

Overall, The First National Bank of Anderson held equity amounting to 9.68 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 effect of problem assets, such as unpaid mortgages, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

A bank with large numbers of these kinds of assets may eventually be forced to use capital to absorb losses, reducing its cushion of equity. 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 lower earnings and potentially more risk of a future failure.

The First National Bank of Anderson scored 36 out of a possible 40 points on Bankrate's asset quality test, falling short of the national average of 37.49.

A handy indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.87 percent of The First National Bank of Anderson's loans were noncurrent, meaning 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 to deal with problem assets known as an "allowance for loan and lease losses." The size of that reserve can be a widely used 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 The First National Bank of Anderson's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on 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, likely making the bank more resilient in times of trouble. Losses, on the other hand, reduce a bank's ability to do those things.

The First National Bank of Anderson outperformed the average on Bankrate's earnings test, achieving a score of 16 out of a possible 30.

One key measure of a bank's earnings is return on equity, calculated by dividing net income (profit, basically) by total equity. The most recent annualized quarterly return on equity for The First National Bank of Anderson was 7.23 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $1.3 million on total equity of $17.7 million. The bank reported an annualized return on average assets, or ROA, of 0.75 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.