Safe and Sound

The First National Bank of Grayson

Grayson, KY
5
Star Rating
Grayson, KY-based The First National Bank of Grayson is an FDIC-insured bank founded in 1902. Regulatory filings show the bank having equity of $26.2 million on assets of $261.1 million, as of December 31, 2017.

With 99 full-time employees in 8 offices in KY, the bank currently holds loans and leases worth $157.0 million, including real estate loans of $120.9 million. U.S. bank customers currently have $233.5 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, The First National Bank of Grayson exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a look at how the bank did on the three important criteria Bankrate used to grade American banks on safety and soundness.

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SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial stability, capital is useful. It acts as a cushion against losses and as protection for depositors when a bank is experiencing economic instability. When it comes to safety and soundness, the higher the capital, the better.

On our test to measure capital adequacy, The First National Bank of Grayson received a score of 10 out of a possible 30 points, less than the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. The First National Bank of Grayson's Tier 1 capital ratio was 19.10 percent, exceeding the 6 percent level regulators consider adequate, but lower than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to financial downturns.

Overall, The First National Bank of Grayson held equity amounting to 10.04 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 effect of problem assets, such as unpaid mortgages, on the bank's loan loss reserves and overall capitalization.

Having extensive holdings of these kinds of assets suggests a bank may eventually have to use capital to cover losses, diminishing its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning money, resulting in lower earnings and potentially more risk of a failure in the future.

The First National Bank of Grayson scored 40 out of a possible 40 points on Bankrate's test of asset quality, beating out 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, 0.52 percent of The First National Bank of Grayson'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 keep a reserve to handle problem assets known as an "allowance for loan and lease losses." Comparing the size of that reserve to the total amount of problem loans can be a widely used indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on The First National Bank of Grayson's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its safety and soundness. Earnings may be retained by the bank, increasing its capital cushion, or be used to deal with problematic loans, potentially making the bank more resilient in times of trouble. Losses, on the other hand, lessen a bank's ability to do those things.

The First National Bank of Grayson outperformed the average on Bankrate's earnings test, achieving a score of 20 out of a possible 30.

Return on equity, calculated by dividing net income (profit, essentially) by total equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for The First National Bank of Grayson was 10.61 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $2.7 million on total equity of $26.2 million. The bank had an annualized return on average assets, or ROA, of 1.05 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.