Safe and Sound

First Security Bank

Owensboro, KY
3
Star Rating
Owensboro, KY-based First Security Bank is an FDIC-insured bank founded in 1997. Regulatory filings show the bank having equity of $58.2 million on $597.3 million in assets, as of December 31, 2017.

With 125 full-time employees in 11 offices in multiple states, the bank currently holds loans and leases worth $413.0 million, including real estate loans of $385.3 million. U.S. bank customers currently have $468.0 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, First Security Bank 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 key criteria Bankrate used to score U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a cushion against losses and affords protection for account holders when a bank is struggling financially. Therefore, when it comes to measuring an a bank's financial strength, capital is essential. When it comes to safety and soundness, more capital is preferred.

First Security Bank received a score of 10 out of a possible 30 points on our test to measure capital adequacy, below the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. First Security Bank's Tier 1 capital ratio was 13.53 percent, exceeding the 6 percent level considered adequate by regulators, but below the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather financial challenges.

Overall, First Security Bank held equity amounting to 9.74 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 loan loss reserves and overall capitalization could be affected by troubled assets, such as unpaid mortgages.

A bank with large numbers of these types of assets could eventually be forced to use capital to cover losses, shrinking its cushion of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning interest for the bank, resulting in depressed earnings and potentially more risk of a failure in the future.

First Security Bank scored 32 out of a possible 40 points on Bankrate's test of asset quality, failing to reach the national average of 37.49.

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, 2.15 percent of First Security Bank'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 keep a reserve to handle problem assets known as an "allowance for loan and lease losses." How large that reserve is can be a widely used indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on First Security Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money has an effect on its safety and soundness. A bank can retain its earnings, boosting its capital cushion, or use them to address problematic loans, likely making the bank better able to withstand financial trouble. Banks that are losing money, however, are less able to do those things.

On Bankrate's test of earnings, First Security Bank scored 10 out of a possible 30, coming in below the national average of 15.12.

Return on equity, calculated by dividing net income (profit, essentially) by total equity, is one important measure of a bank's earnings. The most recent annualized quarterly return on equity for First Security Bank was 5.00 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $2.8 million on total equity of $58.2 million. The bank had an annualized return on average assets, or ROA, of 0.46 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.