Safe and Sound

First National Bank in Pratt

Pratt, KS
2
Star Rating
Founded in 1902, First National Bank in Pratt is an FDIC-insured bank based in Pratt, KS. The bank holds equity of $11.1 million on $105.2 million in assets, according to December 31, 2017, regulatory filings.

With 21 full-time employees, the bank currently holds loans and leases worth $53.0 million, including real estate loans of $25.6 million. U.S. bank customers currently have $87.8 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, First National Bank in Pratt exhibited a below-average condition, earning 2 out of 5 stars for safety and soundness. Keep reading for an analysis of how the bank fared on the three major criteria Bankrate used to evaluate American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a buffer against losses and affords protection for depositors when a bank is struggling financially. Therefore, a bank's level of capital is an important measurement of an institution's financial strength. From a safety and soundness perspective, more capital is better.

First National Bank in Pratt received a score of 10 out of a possible 30 points on our test to measure capital adequacy, falling short of the national average of 13.13.

A bank's Tier 1 capital ratio is a commonly used measure of this buffer. First National Bank in Pratt's Tier 1 capital ratio was 15.81 percent, exceeding the 6 percent level regulators consider adequate, but below the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather financial headwinds.

Overall, First National Bank in Pratt held equity amounting to 10.54 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to estimate the impact of troubled assets, such as unpaid mortgages, on the bank's loan loss reserves and overall capitalization.

Having a large number of these kinds of assets suggests a bank may have to use capital to cover losses, cutting down on its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and no longer earning interest for the bank, decreasing earnings and increasing the chances of a failure in the future.

First National Bank in Pratt scored 36 out of a possible 40 points on Bankrate's asset quality test, below the national average of 37.49.

A helpful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 2.54 percent of First National Bank in Pratt'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." Comparing how large that reserve is to the total amount of at-risk loans can be a helpful indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on First National Bank in Pratt's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability has an effect on its long-term survivability. Earnings can be retained by the bank, boosting its capital cushion, or be used to deal with problematic loans, likely making the bank better prepared to withstand economic trouble. Losses, on the other hand, take away from a bank's ability to do those things.

First National Bank in Pratt scored 0 out of a possible 30 on Bankrate's earnings test, below the national average of 15.12.

One widely used measure of a bank's earnings is return on equity, calculated by dividing net income (profit, essentially) by total equity. The most recent annualized quarterly return on equity for First National Bank in Pratt was -3.59 percent, below the national average of 8.10 percent.

The bank reported net income of $-422,000 on total equity of $11.1 million for the twelve months ended December 31, 2017. The bank had 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.