Safe and Sound

First National Bank in Fredonia

Fredonia, KS
5
Star Rating
First National Bank in Fredonia is an FDIC-insured bank founded in 1871 and currently headquartered in Fredonia, KS. As of December 31, 2017, the bank had equity of $15.1 million on assets of $95.3 million.

Thanks to the work of 16 full-time employees, the bank has amassed loans and leases worth $30.9 million, $14.3 million of which are for real estate. U.S. bank customers currently have $80.2 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, First National Bank in Fredonia 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 evaluate U.S. banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

Capital is a useful measurement of an institution's financial strength. It works as a bulwark against losses and as protection for depositors during periods of economic trouble for the bank. When it comes to safety and soundness, the more capital, the better.

First National Bank in Fredonia scored above the national average of 13.13 points on our test to measure the adequacy of a bank's capital, receiving a score of 22 out of a possible 30 points.

One important measure of this buffer is a bank's Tier 1 capital ratio. First National Bank in Fredonia's Tier 1 capital ratio was 32.06 percent, above the 6 percent level regulators consider adequate, and higher than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather economic downturns.

Overall, First National Bank in Fredonia held equity amounting to 15.83 percent of its assets, which exceeded 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 loans, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

Having lots of these kinds of assets may eventually force a bank to use capital to absorb losses, shrinking its equity buffer. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, decreasing earnings and elevating the risk of a failure in the future.

First National Bank in Fredonia beat out the national average of 37.49 on Bankrate's asset quality test, racking up 40 out of a possible 40 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, 2.41 percent of First National Bank in Fredonia'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 maintain a reserve known as an "allowance for loan and lease losses" to deal with problem assets . Comparing how large that reserve is to the total amount of problematic loans can be a useful indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on First National Bank in Fredonia's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability has an effect on its long-term survivability. Earnings may be retained by the bank, increasing its capital buffer, or be used to deal with 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.

First National Bank in Fredonia beat the national average on Bankrate's earnings test, achieving a score of 18 out of a possible 30.

Return on equity, calculated by dividing net income (essentially, profit) by total equity, is one important measure of a bank's earnings. First National Bank in Fredonia's most recent annualized quarterly return on equity was 8.24 percent, above the national average of 8.10 percent.

The bank recorded net income of $1.2 million on total equity of $15.1 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 1.32 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above 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.