Safe and Sound

The First National Bank of Fort Smith

Fort Smith, AR
5
Star Rating
Fort Smith, AR-based The First National Bank of Fort Smith is an FDIC-insured bank founded in 1872. Regulatory filings show the bank having equity of $161.7 million on $1.31 billion in assets, as of December 31, 2017.

Thanks to the efforts of 292 full-time employees in 21 offices in multiple states, the bank holds loans and leases worth $848.5 million, including real estate loans of $684.3 million. U.S. bank customers currently have $1.13 billion in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, The First National Bank of Fort Smith 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 key criteria Bankrate used to evaluate American banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a bulwark against losses and provides protection for depositors when a bank is struggling financially. Therefore, when it comes to measuring an an institution's financial stability, capital is key. When it comes to safety and soundness, more capital is preferred.

The First National Bank of Fort Smith beat out the national average of 13.13 points on our test to measure capital adequacy, racking up 14 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. The First National Bank of Fort Smith's Tier 1 capital ratio was 13.76 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 economic headwinds.

Overall, The First National Bank of Fort Smith held equity amounting to 12.38 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

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

Having large numbers of these types of assets may eventually require a bank to use capital to cover losses, shrinking its equity cushion. Many of those assets are also likely to be in non-accrual status and thus aren't earning interest for the bank, resulting in reduced earnings and potentially more risk of a failure in the future.

The First National Bank of Fort Smith scored 40 out of a possible 40 points on Bankrate's test of asset quality, exceeding the national average of 37.49.

A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.67 percent of The First National Bank of Fort Smith'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 the reserve's size to the total amount of at-risk loans can be a helpful indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on The First National Bank of Fort Smith's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its safety and soundness. Earnings can be retained by the bank, giving a boost to its capital buffer, or be used to deal with 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.

The First National Bank of Fort Smith beat the national average on Bankrate's test of earnings, achieving a score of 22 out of a possible 30.

Return on equity, calculated by dividing net income (profit, essentially) by total equity, is one important way to measure a bank's earnings. The First National Bank of Fort Smith's most recent annualized quarterly return on equity was 13.54 percent, above the national average of 8.10 percent.

The bank reported net income of $21.9 million on total equity of $161.7 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 1.71 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.