Safe and Sound

The First National Bank of Floydada

Floydada, TX
5
Star Rating
The First National Bank of Floydada is an FDIC-insured bank founded in 1890 and currently headquartered in Floydada, TX. As of December 31, 2017, the bank held equity of $11.3 million on $110.4 million in assets.

With 12 full-time employees, the bank holds loans and leases worth $59.7 million, including real estate loans of $13.4 million. U.S. bank customers currently have $99.0 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, The First National Bank of Floydada exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's an analysis of how the bank did on the three major criteria Bankrate used to score U.S. banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a cushion against losses and affords protection for depositors when a bank is struggling financially. Therefore, when it comes to measuring an an institution's financial stability, capital is valuable. When looking at safety and soundness, the higher the capital, the better.

On our test to measure the adequacy of a bank's capital, The First National Bank of Floydada received a score of 12 out of a possible 30 points, falling short of 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 Floydada's Tier 1 capital ratio was 13.72 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 weather financial difficulties.

Overall, The First National Bank of Floydada held equity amounting to 10.22 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test is intended to estimate how the bank's capitalization and allocated loan loss reserves could be affected by problem assets, such as past-due mortgages.

Having a large number of these types of assets may eventually require a bank to use capital to cover losses, shrinking its buffer of equity. Many of those assets are also likely to be in non-accrual status and no longer earning money, resulting in reduced earnings and potentially more risk of a future failure.

The First National Bank of Floydada scored 40 out of a possible 40 points on Bankrate's test of asset quality, beating 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, none of The First National Bank of Floydada'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 known as an "allowance for loan and lease losses" to deal with problem assets . Comparing how large that reserve is to the total amount of problematic loans can be a useful indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on The First National Bank of Floydada'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, boosting its capital buffer, or put them to work addressing problematic loans, potentially making the bank more resilient in times of trouble. Banks that are losing money, however, are less able to do those things.

On Bankrate's earnings test, The First National Bank of Floydada scored 26 out of a possible 30, beating the national average of 15.12.

One important way to measure a bank's earnings is return on equity, or net income (essentially profit) divided by the total amount of equity. The First National Bank of Floydada's most recent annualized quarterly return on equity was 16.06 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $1.8 million on total equity of $11.3 million. The bank had an annualized return on average assets, or ROA, of 1.74 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above 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.