Safe and Sound

First Federal Savings and Loan Association

Hazard, KY
4
Star Rating
Started in 1960, First Federal Savings and Loan Association is an FDIC-insured bank headquartered in Hazard, KY. As of December 31, 2017, the bank held equity of $18.2 million on assets of $73.1 million.

Thanks to the efforts of 12 full-time employees, the bank has amassed loans and leases worth $65.5 million, $64.4 million of which are for real estate. The bank currently holds $47.2 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, First Federal Savings and Loan Association exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a look at how the bank did on the three major criteria Bankrate used to grade U.S. banks.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a cushion against losses and as protection for account holders during periods of economic trouble for the bank. Therefore, a bank's level of capital is a crucial measurement of a bank's financial fortitude. When looking at safety and soundness, the higher the capital, the better.

First Federal Savings and Loan Association racked up 30 out of a possible 30 points on our test to measure capital adequacy, beating out the national average of 13.13.

One essential measure of this buffer is a bank's Tier 1 capital ratio. First Federal Savings and Loan Association's Tier 1 capital ratio was 44.69 percent, exceeding the 6 percent level considered adequate by regulators, and above the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather economic challenges.

Overall, First Federal Savings and Loan Association held equity amounting to 24.86 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to try to understand how the bank's loan loss reserves and overall capitalization could be affected by troubled assets, such as unpaid mortgages.

A bank with lots of these types of assets could eventually have to use capital to absorb losses, cutting down on its equity cushion. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, resulting in lower earnings and potentially more risk of a failure in the future.

First Federal Savings and Loan Association scored below the national average of 37.49 on Bankrate's test of asset quality, racking up 32 out of a possible 40 points .

The percentage of problem assets a bank holds compared to its total assets is a handy indicator of asset quality.As of December 31, 2017, 4.38 percent of First Federal Savings and Loan Association'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 to deal with troubled assets known as an "allowance for loan and lease losses." The size of that reserve can be a widely used indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on First Federal Savings and Loan Association's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its safety and soundness. Earnings may be retained by the bank, giving a boost to its capital buffer, or be used to address problematic loans, potentially making the bank better able to withstand financial shocks. Losses, on the other hand, reduce a bank's ability to do those things.

First Federal Savings and Loan Association scored 4 out of a possible 30 on Bankrate's test of earnings, failing to reach the national average of 15.12.

Return on equity, calculated by dividing net income (essentially, profit) by the total amount of equity, is one important way to measure a bank's earnings. First Federal Savings and Loan Association's most recent annualized quarterly return on equity was 1.59 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $287,000 on total equity of $18.2 million. The bank experienced an annualized return on average assets, or ROA, of 0.41 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.