For the year ended December 31, 2009, the bank recorded a net loss of $-1,249.00 thousand. The bank experienced a return on average assets of -0.41% over the latest four quarters. Year earlier results amounted to a net loss of $-2,752.00 thousand, or a -1.83% annualized ROA. An ROA of at least 1.0% is deemed satisfactory in accordance with banking industry standards, and the industry's ROA for the year of 2009 was approximately .01%. We have concluded that for the year of 2009, the bank achieved substantially below average return on equity , and, as noted, sustained an actual loss for that one year period . We deem net interest margin to have been substantially below average, and the reported percentage should cause inquiry into balance sheet composition, asset yields, and liability costs. Noninterest income was better than normal. We also observed overhead ratios that were higher than average, and the composition of overhead should be thoroughly analyzed. Importantly, net interest margins, noninterest income components, and overhead expense levels represent operating factors that combine to impact overall operating results.
ASSET QUALITY ANALYSIS
The bank revealed, as previously stated, good asset quality. Our conclusion with respect to asset quality incorporates our analysis of data depicting regional economic conditions as well as our computations of a relatively low December 31, 2009 nonperforming asset ratio, much better than normal reserve coverage for nonperforming loans, and apparently acceptable quality, or no greater than average, holdings of commercial real estate and construction loans, two categories that can intensify credit risk.
Other asset categories, such as farm and consumer loans, which may carry more than usual default potential, should not have a substantial negative impact upon future results.
Loan yield can measure financial reward versus credit risk. Excessive loan yield may be an indicator of existing or future problems. Our loan review indicates that the bank has assumed a seemingly prudent position between credit risk and financial reward. Likewise, for banking institutions, substantially higher than normal asset growth can be deemed speculative and can lead to financial deterioration. This bank exhibits such growth which, if unrelated to merger activity, should be subject to further inquiry.
As of December 31, 2009, the bank displayed Below Normal balance sheet liquidity and a Somewhat Greater Than Average Dependence upon wholesale, or non-core liabilities, which include all borrowings, such as Federal Home Loan Bank Advances, and CD's greater than $100,000.
Accounting principles require some securities to be categorized as "Available-for-Sale. " Changes in market value of these securities are reflected through the GAAP (Generally Accepted Accounting Principles) net worth of the institution. Based upon the bank's present balance sheet, changes in the value of the current level of securities reported as "Available-for-Sale" are almost certain to have a substantial impact upon future net worth of the bank.
This bank has been rated below average.
Negative factors that impacted that rating follow:
As noted previously, early warning indicators, possibly requiring specific investigation include:
Net Interest Margin
As stated, we have determined a composite Star rating for this bank of 2 G , indicative of a below average financial condition. At times, financial conditions of banks change rapidly and significantly. Hence, our Safe & Sound Star ratings should not be deemed predictive of likely future ratings. However, in view of early warning indicators set forth within this report, in combination with the institution's financial data, we believe that the Star rating for this institution is unlikely to change within the ensuing twelve month period.