Safe and Sound

First National Bank and Trust

London, KY
3
Star Rating
Started in 1903, First National Bank and Trust is an FDIC-insured bank headquartered in London, KY. Regulatory filings show the bank having equity of $23.7 million on assets of $224.9 million, as of December 31, 2017.

With 58 full-time employees in 4 offices in KY, the bank holds loans and leases worth $102.7 million, including real estate loans of $76.8 million. U.S. bank customers currently have $183.5 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, First National Bank and Trust exhibited a generally satisfactory condition, earning 3 out of 5 stars for safety and soundness. Here's an analysis of how the bank fared on the three important criteria Bankrate used to grade American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a buffer against losses and as protection for account holders when a bank is struggling financially. It follows then that a bank's level of capital is a useful measurement of an institution's financial strength. From a safety and soundness perspective, the higher the capital, the better.

On our test to measure capital adequacy, First National Bank and Trust received a score of 12 out of a possible 30 points, coming in below the national average of 13.13.

A bank's Tier 1 capital ratio is an essential measure of this buffer. First National Bank and Trust's Tier 1 capital ratio was 15.93 percent, exceeding the 6 percent level regulators consider adequate, but lower than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to economic difficulties.

Overall, First National Bank and Trust held equity amounting to 10.53 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test is intended to try to understand how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by troubled assets, such as unpaid mortgages.

A bank with a large number of these types of assets could eventually be required to use capital to cover losses, cutting down on its buffer of equity. Many of those assets are also likely to be in non-accrual status and no longer earning money, resulting in lower earnings and potentially more risk of a future failure.

On Bankrate's asset quality test, First National Bank and Trust scored 36 out of a possible 40 points, coming in below the national average of 37.49 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, 1.47 percent of First National Bank and Trust'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 problem 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 problem assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on First National Bank and Trust's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability has an effect on its long-term survivability. A bank can retain its earnings, increasing its capital buffer, or use them to deal with problematic loans, potentially making the bank better prepared to withstand economic shocks. Obviously, banks that are losing money have less ability to do those things.

First National Bank and Trust fell short of the national average on Bankrate's test of earnings, achieving a score of 4 out of a possible 30.

One key measure of a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by the total amount of equity. The most recent annualized quarterly return on equity for First National Bank and Trust was 1.12 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $271,000 on total equity of $23.7 million. The bank had an annualized return on average assets, or ROA, of 0.13 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.