Safe and Sound

The First National Bank of Hutchinson

Hutchinson, KS
4
Star Rating
Started in 1876, The First National Bank of Hutchinson is an FDIC-insured bank based in Hutchinson, KS. Regulatory filings show the bank having equity of $83.0 million on assets of $756.5 million, as of December 31, 2017.

Thanks to the work of 173 full-time employees in 8 offices in KS, the bank holds loans and leases worth $425.6 million, including $299.5 million worth of real estate loans. The bank currently holds $584.0 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, The First National Bank of Hutchinson exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a look at how the bank did on the three key criteria Bankrate used to grade American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a buffer against losses and provides protection for depositors when a bank is struggling financially. Therefore, a bank's level of capital is a key measurement of a bank's financial fortitude. When looking at safety and soundness, the more capital, the better.

On our test to measure capital adequacy, The First National Bank of Hutchinson received a score of 12 out of a possible 30 points, failing to reach 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 Hutchinson's Tier 1 capital ratio was 14.83 percent, higher than the 6 percent level regulators consider adequate, but under the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather financial difficulties.

Overall, The First National Bank of Hutchinson held equity amounting to 10.91 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 impact of problem assets, such as unpaid loans, on the bank's loan loss reserves and overall capitalization.

Having a large number of these kinds of assets means a bank could have to use capital to cover losses, reducing its buffer of equity. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning interest for the bank, pushing down earnings and increasing the chances of a failure in the future.

The First National Bank of Hutchinson scored 40 out of a possible 40 points on Bankrate's test of asset quality, above 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, 0.20 percent of The First National Bank of Hutchinson'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 . The size of that reserve can be a useful 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 The First National Bank of Hutchinson's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its long-term survivability. Earnings can be retained by the bank, boosting its capital buffer, or be used to deal with problematic loans, potentially making the bank more resilient in tough times. However, banks that are losing money have less ability to do those things.

The First National Bank of Hutchinson beat the national average on Bankrate's test of earnings, achieving a score of 16 out of a possible 30.

One widely used way to measure a bank's earnings is return on equity, or net income (profit, basically) divided by total equity. The First National Bank of Hutchinson's most recent annualized quarterly return on equity was 7.05 percent, below the national average of 8.10 percent.

The bank reported net income of $5.8 million on total equity of $83.0 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.82 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.