Safe and Sound

The First National Bank of Quitaque

Quitaque, TX
5
Star Rating
Quitaque, TX-based The First National Bank of Quitaque is an FDIC-insured bank founded in 1920. Regulatory filings show the bank having equity of $8.3 million on assets of $54.0 million, as of December 31, 2017.

Thanks to the work of 11 full-time employees, the bank has amassed loans and leases worth $31.4 million, including $2.5 million worth of real estate loans. U.S. bank customers currently have $44.9 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, The First National Bank of Quitaque exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a look at how the bank fared on the three major criteria Bankrate used to grade American banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a cushion against losses and affords protection for depositors when a bank is experiencing economic trouble. It follows then that a bank's level of capital is an important measurement of an institution's financial strength. When looking at safety and soundness, the more capital, the better.

The First National Bank of Quitaque beat out the national average of 13.13 points on our test to measure capital adequacy, receiving a score of 22 out of a possible 30 points.

A bank's Tier 1 capital ratio is a commonly used measure of this buffer. The First National Bank of Quitaque's Tier 1 capital ratio was 24.38 percent, exceeding the 6 percent level considered adequate by regulators, but under the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to economic difficulties.

Overall, The First National Bank of Quitaque held equity amounting to 15.39 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to determine the impact of problem assets, such as unpaid loans, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

Having lots of these kinds of assets could eventually require a bank to use capital to cover 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, reducing earnings and increasing the chances of a failure in the future.

The First National Bank of Quitaque fell short of the national average of 37.49 on Bankrate's test of asset quality, racking up 36 out of a possible 40 points .

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, 2.77 percent of The First National Bank of Quitaque's loans were noncurrent, meaning they were more than 90 days past due or were in non-accrual status. That's above 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 size of that reserve to the total amount of problem 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 Quitaque's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its safety and soundness. Earnings can be retained by the bank, increasing its capital cushion, or be used to address problematic loans, potentially making the bank more resilient in tough times. Conversely, losses lessen a bank's ability to do those things.

The First National Bank of Quitaque received below-average marks on Bankrate's test of earnings, achieving a score of 12 out of a possible 30.

One key way to measure a bank's earnings is return on equity, or net income (profit, essentially) divided by total equity. The most recent annualized quarterly return on equity for The First National Bank of Quitaque was 5.50 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $452,000 on total equity of $8.3 million. The bank had an annualized return on average assets, or ROA, of 0.86 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.