Safe and Sound

The First National Bank of Mount Vernon

Mount Vernon, TX
5
Star Rating
The First National Bank of Mount Vernon is an FDIC-insured bank started in 1900 and currently based in Mount Vernon, TX. The bank holds equity of $21.7 million on assets of $208.9 million, according to December 31, 2017, regulatory filings.

U.S. bank customers have $153.0 million on deposit at 3 offices in TX run by 37 full-time employees. With that footprint, the bank has amassed loans and leases worth $86.1 million, including real estate loans of $79.7 million.

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

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a cushion against losses and as protection for depositors when a bank is struggling financially. It follows then that a bank's level of capital is a key measurement of an institution's financial strength. From a safety and soundness perspective, the more capital, the better.

The First National Bank of Mount Vernon received a score of 12 out of a possible 30 points on our test to measure capital adequacy, failing to reach the national average of 13.13.

A bank's Tier 1 capital ratio is a widely followed measure of this buffer. The First National Bank of Mount Vernon's Tier 1 capital ratio was 27.55 percent, above the 6 percent level regulators consider adequate, and exceeding the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather financial challenges.

Overall, The First National Bank of Mount Vernon held equity amounting to 10.40 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to try to understand how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by troubled assets, such as unpaid mortgages.

Having extensive holdings of these kinds of assets means a bank could eventually have 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 thus aren't earning interest for the bank, resulting in diminished earnings and potentially more risk of a failure in the future.

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

A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.29 percent of The First National Bank of Mount Vernon'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 maintain a reserve known as an "allowance for loan and lease losses" to deal with problem assets . How large that reserve is can be a helpful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on The First National Bank of Mount Vernon's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money affects its long-term survivability. Earnings may be retained by the bank, giving a boost to its capital cushion, or be used to deal with problematic loans, likely making the bank more resilient in times of trouble. However, banks that are losing money have less ability to do those things.

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

One important measure of a bank's earnings is return on equity, or net income (profit, basically) divided by the total amount of equity. The most recent annualized quarterly return on equity for The First National Bank of Mount Vernon was 12.73 percent, above the national average of 8.10 percent.

The bank earned net income of $2.7 million on total equity of $21.7 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 1.33 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.