Safe and Sound

First National Bank

Hamilton, AL
5
Star Rating
Hamilton, AL-based First National Bank is an FDIC-insured bank started in 1976. Regulatory filings show the bank having equity of $46.9 million on $293.5 million in assets, as of December 31, 2017.

U.S. bank customers have $246.1 million on deposit at 8 offices in AL run by 93 full-time employees. With that footprint, the bank holds loans and leases worth $118.6 million, $67.9 million of which are for real estate.

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

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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 experiencing financial instability. It follows then that when it comes to measuring an a bank's financial resilience, capital is important. From a safety and soundness perspective, the more capital, the better.

On our test to measure capital adequacy, First National Bank racked up 22 out of a possible 30 points, exceeding the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. First National Bank's Tier 1 capital ratio was 31.19 percent, above the 6 percent level considered adequate by regulators, 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 held equity amounting to 15.98 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.

A bank with extensive holdings of these kinds of assets could eventually have to use capital to absorb losses, decreasing its cushion of equity. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning money, decreasing earnings and increasing the chances of a future failure.

On Bankrate's test of asset quality, First National Bank scored 40 out of a possible 40 points, exceeding 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, 0.35 percent of First National Bank'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 to deal with problem assets known as an "allowance for loan and lease losses." The size of that reserve can be a helpful 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's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its long-term survivability. Earnings can be retained by the bank, giving a boost to its capital cushion, or be used to address problematic loans, likely making the bank better able to withstand economic shocks. Losses, on the other hand, reduce a bank's ability to do those things.

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

Return on equity, calculated by dividing net income (essentially, profit) by the total amount of equity, is one widely used measure of a bank's earnings. The most recent annualized quarterly return on equity for First National Bank was 8.85 percent, above the national average of 8.10 percent.

The bank recorded net income of $4.1 million on total equity of $46.9 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 1.39 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.