Safe and Sound

FIRST NATIONAL BANK OF KENTUCKY

Carrollton, KY
5
Star Rating
FIRST NATIONAL BANK OF KENTUCKY is a Carrollton, KY-based, FDIC-insured bank that opened its doors in 1881. Regulatory filings show the bank having equity of $13.0 million on assets of $111.6 million, as of December 31, 2017.

U.S. bank customers have $88.5 million on deposit at 2 offices in KY run by 28 full-time employees. With that footprint, the bank currently holds loans and leases worth $75.7 million, including $69.6 million worth of real estate loans.

Overall, Bankrate believes that, as of December 31, 2017, FIRST NATIONAL BANK OF KENTUCKY exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a breakdown of how the bank fared on the three key criteria Bankrate used to grade U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

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

FIRST NATIONAL BANK OF KENTUCKY scored above the national average of 13.13 points on our test to measure capital adequacy, scoring 14 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. FIRST NATIONAL BANK OF KENTUCKY's Tier 1 capital ratio was 19.45 percent, exceeding the 6 percent level regulators consider adequate, but less than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather economic difficulties.

Overall, FIRST NATIONAL BANK OF KENTUCKY held equity amounting to 11.64 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

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

Having extensive holdings of these kinds of assets could eventually require a bank to use capital to cover losses, shrinking its equity cushion. Many of those assets are also likely to be in non-accrual status and no longer earning money, resulting in reduced earnings and potentially more risk of a future failure.

On Bankrate's asset quality test, FIRST NATIONAL BANK OF KENTUCKY scored 40 out of a possible 40 points, above the national average of 37.49 points.

The percentage of problem assets a bank holds compared to its total assets is a useful indicator of asset quality.As of December 31, 2017, 0.84 percent of FIRST NATIONAL BANK OF KENTUCKY'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 known as an "allowance for loan and lease losses" to deal with troubled assets . How large that reserve is can be a useful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on FIRST NATIONAL BANK OF KENTUCKY's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability affects its long-term survivability. Earnings may be retained by the bank, giving a boost to its capital buffer, or be used to deal with problematic loans, potentially making the bank more resilient in tough times. Losses, on the other hand, lessen a bank's ability to do those things.

On Bankrate's test of earnings, FIRST NATIONAL BANK OF KENTUCKY scored 18 out of a possible 30, exceeding the national average of 15.12.

One widely used way to measure a bank's earnings is return on equity, calculated by dividing net income (profit, essentially) by total equity. FIRST NATIONAL BANK OF KENTUCKY's most recent annualized quarterly return on equity was 9.24 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $1.2 million on total equity of $13.0 million. The bank had an annualized return on average assets, or ROA, of 1.09 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.