Safe and Sound

The First National Bank of Lawrence County at Walnut Ridge

Walnut Ridge, AR
5
Star Rating
The First National Bank of Lawrence County at Walnut Ridge is a Walnut Ridge, AR-based, FDIC-insured bank dating back to 1919. The bank holds equity of $21.3 million on $194.3 million in assets, according to December 31, 2017, regulatory filings.

With 58 full-time employees in 5 offices in AR, the bank currently holds loans and leases worth $120.2 million, including real estate loans of $79.5 million. U.S. bank customers currently have $172.1 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, The First National Bank of Lawrence County at Walnut Ridge exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a breakdown of how the bank did on the three major criteria Bankrate used to evaluate U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a bulwark against losses and affords protection for depositors during periods of financial instability for the bank. It follows then that when it comes to measuring an an institution's financial resilience, capital is valuable. From a safety and soundness perspective, the more capital, the better.

On our test to measure capital adequacy, The First National Bank of Lawrence County at Walnut Ridge received a score of 12 out of a possible 30 points, falling short of the national average of 13.13.

A bank's Tier 1 capital ratio is an essential measure of this buffer. The First National Bank of Lawrence County at Walnut Ridge's Tier 1 capital ratio was 17.42 percent, above the 6 percent level regulators consider adequate, but under the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather economic downturns.

Overall, The First National Bank of Lawrence County at Walnut Ridge held equity amounting to 10.96 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 impact of troubled assets, such as past-due mortgages, on the bank's capitalization and allocated loan loss reserves.

Having a large number of these types of assets could eventually require a bank to use capital to cover losses, shrinking its equity buffer. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, reducing earnings and elevating the risk of a failure in the future.

The First National Bank of Lawrence County at Walnut Ridge scored 40 out of a possible 40 points on Bankrate's asset quality test, beating 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, 0.61 percent of The First National Bank of Lawrence County at Walnut Ridge'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 keep 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 problem loans. Unfortunately, the FDIC did not provide information on The First National Bank of Lawrence County at Walnut Ridge's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money affects its long-term survivability. A bank can retain its earnings, boosting its capital cushion, or put them to work addressing problematic loans, potentially making the bank more resilient in tough times. Obviously, banks that are losing money have less ability to do those things.

On Bankrate's earnings test, The First National Bank of Lawrence County at Walnut Ridge scored 20 out of a possible 30, beating the national average of 15.12.

Return on equity, calculated by dividing net income (profit, essentially) by total equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for The First National Bank of Lawrence County at Walnut Ridge was 11.34 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $2.3 million on total equity of $21.3 million. The bank reported an annualized return on average assets, or ROA, of 1.15 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.