Safe and Sound

Carrollton Federal Bank

Carrollton, KY
5
Star Rating
Carrollton Federal Bank is an FDIC-insured bank founded in 1890 and currently headquartered in Carrollton, KY. Regulatory filings show the bank having equity of $5.0 million on $32.7 million in assets, as of December 31, 2017.

Thanks to the efforts of 10 full-time employees, the bank holds loans and leases worth $23.0 million, including $22.1 million worth of real estate loans. The bank currently holds $27.7 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, Carrollton Federal Bank 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 grade American banks on safety and soundness.

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SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital is a valuable measurement of a bank's financial strength. It works as a bulwark against losses and provides protection for accountholders during periods of financial instability for the bank. When looking at safety and soundness, the more capital, the better.

Carrollton Federal Bank racked up 22 out of a possible 30 points on our test to measure capital adequacy, above the national average of 13.13.

A bank's Tier 1 capital ratio is an important measure of this buffer. Carrollton Federal Bank's Tier 1 capital ratio was 27.10 percent, above the 6 percent level regulators consider adequate, and above the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather economic downturns.

Overall, Carrollton Federal Bank held equity amounting to 15.21 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test is intended to try to understand how the bank's capitalization and allocated loan loss reserves could be affected by problem assets, such as unpaid loans.

Having lots of these types of assets means a bank may eventually have to use capital to cover losses, reducing its equity cushion. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning money, pushing down earnings and increasing the chances of a future failure.

Carrollton Federal Bank beat out the national average of 37.49 on Bankrate's asset quality test, racking up 40 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, 0.34 percent of Carrollton Federal Bank'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 to deal with problem assets known as an "allowance for loan and lease losses." That reserve's size can be a helpful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on Carrollton Federal Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its safety and soundness. A bank can retain its earnings, boosting its capital cushion, or put them to work addressing problematic loans, likely making the bank more resilient in tough times. Losses, on the other hand, take away from a bank's ability to do those things.

Carrollton Federal Bank did below-average on Bankrate's test of earnings, achieving a score of 8 out of a possible 30.

One important way to measure a bank's earnings is return on equity, or net income (essentially profit) divided by the total amount of equity. Carrollton Federal Bank's most recent annualized quarterly return on equity was 3.06 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $151,000 on total equity of $5.0 million. The bank had an annualized return on average assets, or ROA, of 0.45 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.