Safe and Sound

American Founders Bank, Inc.

2
Star Rating
Louisville, KY-based American Founders Bank, Inc. is an FDIC-insured bank started in 2001. Regulatory filings show the bank having equity of $12.2 million on assets of $113.4 million, as of December 31, 2017.

U.S. bank customers have $91.7 million on deposit at 2 offices in KY run by 18 full-time employees. With that footprint, the bank has amassed loans and leases worth $93.9 million, including $68.3 million worth of real estate loans.

Overall, Bankrate believes that, as of December 31, 2017, American Founders Bank, Inc. exhibited a below-average condition, earning 2 out of 5 stars for safety and soundness. Here's a breakdown of how the bank did on the three major criteria Bankrate used to grade American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital is an important measurement of an institution's financial resilience. It works as a bulwark against losses and as protection for depositors when a bank is experiencing financial trouble. When looking at safety and soundness, more capital is preferred.

American Founders Bank, Inc. received a score of 12 out of a possible 30 points on our test to measure the adequacy of a bank's capital, coming in below the national average of 13.13.

One widely followed measure of this buffer is a bank's Tier 1 capital ratio. American Founders Bank, Inc.'s Tier 1 capital ratio was 14.05 percent, exceeding the 6 percent level regulators consider adequate, but under the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather economic headwinds.

Overall, American Founders Bank, Inc. held equity amounting to 10.74 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to estimate the effect of troubled assets, such as unpaid mortgages, on the bank's capitalization and allocated loan loss reserves.

Having extensive holdings of these kinds of assets suggests a bank may have to use capital to absorb losses, cutting down on its cushion of equity. Many of those assets are also likely to be in non-accrual status and no longer earning money, resulting in depressed earnings and potentially more risk of a failure in the future.

On Bankrate's asset quality test, American Founders Bank, Inc. scored 32 out of a possible 40 points, falling short of the national average of 37.49 points.

The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of December 31, 2017, 2.26 percent of American Founders Bank, Inc.'s loans were noncurrent -- in other words, 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 keep a reserve to deal with troubled assets known as an "allowance for loan and lease losses." That reserve's size can be a handy indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on American Founders Bank, Inc.'s loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its long-term survivability. A bank can retain its earnings, increasing its capital buffer, or put them to work addressing problematic loans, potentially making the bank more resilient in times of trouble. Banks that are losing money, however, have less ability to do those things.

American Founders Bank, Inc. fell short of the national average on Bankrate's test of earnings, achieving a score of 0 out of a possible 30.

Return on equity, calculated by dividing net income (profit, essentially) by total equity, is one key measure of a bank's earnings. American Founders Bank, Inc.'s most recent annualized quarterly return on equity was -0.05 percent, below the national average of 8.10 percent.

The bank recorded net income of $-6,000 on total equity of $12.2 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of -0.01 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.