Safe and Sound

Warren Bank and Trust Company

Warren, AR
5
Star Rating
Started in 1901, Warren Bank and Trust Company is an FDIC-insured bank headquartered in Warren, AR. As of December 31, 2017, the bank had equity of $20.7 million on $131.0 million in assets.

U.S. bank customers have $105.5 million on deposit at 4 offices in AR run by 37 full-time employees. With that footprint, the bank has amassed loans and leases worth $47.7 million, $35.6 million of which are for real estate.

Overall, Bankrate believes that, as of December 31, 2017, Warren Bank and Trust Company exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for an analysis of how the bank did on the three important criteria Bankrate used to evaluate 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 bulwark against losses and as protection for depositors when a bank is experiencing economic trouble. It follows then that a bank's level of capital is a useful measurement of an institution's financial fortitude. When looking at safety and soundness, the higher the capital, the better.

Warren Bank and Trust Company did better than the national average of 13.13 points on our test to measure the adequacy of a bank's capital, achieving a score of 22 out of a possible 30 points.

One commonly used measure of this buffer is a bank's Tier 1 capital ratio. Warren Bank and Trust Company's Tier 1 capital ratio was 41.28 percent, higher than 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 stand up to financial downturns.

Overall, Warren Bank and Trust Company held equity amounting to 15.79 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 past-due loans, on the bank's capitalization and allocated loan loss reserves.

A bank with extensive holdings of these types of assets may eventually be forced to use capital to cover losses, reducing its buffer of equity. Many of those assets are also likely to be in non-accrual status and no longer earning money, reducing earnings and increasing the chances of a future failure.

Warren Bank and Trust Company beat out the national average of 37.49 on Bankrate's asset quality test, racking up 40 out of a possible 40 points .

The percentage of problem assets a bank holds compared to its total assets is a widely used indicator of asset quality.As of December 31, 2017, 0.33 percent of Warren Bank and Trust Company'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 keep a reserve to handle problem assets known as an "allowance for loan and lease losses." 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 troubled assets. Unfortunately, the FDIC did not provide information on Warren Bank and Trust Company's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance affects its safety and soundness. A bank can retain its earnings, increasing its capital buffer, or put them to work addressing problematic loans, potentially making the bank better able to withstand financial trouble. Losses, on the other hand, lessen a bank's ability to do those things.

Warren Bank and Trust Company scored 12 out of a possible 30 on Bankrate's test of earnings, lower than the national average of 15.12.

One widely used measure of a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by total equity. The most recent annualized quarterly return on equity for Warren Bank and Trust Company was 5.48 percent, below the national average of 8.10 percent.

The bank earned net income of $1.2 million on total equity of $20.7 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 0.88 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.