Safe and Sound

Nantahala Bank & Trust Company

Franklin, NC
1
Star Rating
Nantahala Bank & Trust Company is a Franklin, NC-based, FDIC-insured bank dating back to 2004. Regulatory filings show the bank having equity of $8.0 million on $151.2 million in assets, as of December 31, 2017.

U.S. bank customers have $131.6 million on deposit at 3 offices in NC run by 44 full-time employees. With that footprint, the bank has amassed loans and leases worth $96.1 million, $89.6 million of which are for real estate.

Overall, Bankrate believes that, as of December 31, 2017, Nantahala Bank & Trust Company exhibited a significantly below-average condition, earning 1 out of 5 stars for safety and soundness. Here's a breakdown of how the bank fared on the three key criteria Bankrate used to grade American banks.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial fortitude, capital is key. It works as a buffer against losses and provides protection for accountholders during periods of financial instability for the bank. When looking at safety and soundness, the more capital, the better.

On our test to measure capital adequacy, Nantahala Bank & Trust Company received a score of 2 out of a possible 30 points, falling short of the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Nantahala Bank & Trust Company's Tier 1 capital ratio was 5.19 percent, lower than the 6 percent level considered adequate by regulators, and less than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to economic headwinds.

Overall, Nantahala Bank & Trust Company held equity amounting to 5.32 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test is intended to estimate how the bank's loan loss reserves and overall capitalization could be affected by troubled assets, such as past-due mortgages.

Having extensive holdings of these kinds of assets may eventually require a bank to use capital to absorb losses, cutting down on its buffer of equity. Many of those assets are also likely to be in non-accrual status and no longer earning money, decreasing earnings and elevating the risk of a failure in the future.

On Bankrate's test of asset quality, Nantahala Bank & Trust Company scored 0 out of a possible 40 points, falling short of the national average of 37.49 points.

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, 2.01 percent of Nantahala Bank & Trust Company'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 troubled assets . Comparing how large that reserve is to the total amount of at-risk loans can be a useful indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Nantahala Bank & Trust Company's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance has an effect on its safety and soundness. Earnings can be retained by the bank, boosting its capital buffer, or be used to address problematic loans, potentially making the bank more resilient in tough times. Conversely, losses diminish a bank's ability to do those things.

Nantahala Bank & Trust Company did below-average on Bankrate's earnings test, achieving a score of 0 out of a possible 30.

One important way to measure a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by total equity. The most recent annualized quarterly return on equity for Nantahala Bank & Trust Company was 2.67 percent, below the national average of 8.10 percent.

The bank earned net income of $214,000 on total equity of $8.0 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.14 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.