Safe and Sound

The First National Bank of Jackson

Jackson, KY
3
Star Rating
Started in 1909, The First National Bank of Jackson is an FDIC-insured bank based in Jackson, KY. Regulatory filings show the bank having equity of $14.3 million on assets of $105.9 million, as of December 31, 2017.

With 33 full-time employees in 2 offices in KY, the bank has amassed loans and leases worth $41.1 million, including real estate loans of $26.6 million. U.S. bank customers currently have $88.9 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, The First National Bank of Jackson exhibited a generally satisfactory condition, earning 3 out of 5 stars for safety and soundness. Keep reading for an analysis of how the bank fared on the three major criteria Bankrate used to grade American banks.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a bulwark against losses and provides protection for account holders when a bank is struggling financially. It follows then that a bank's level of capital is an important measurement of a bank's financial resilience. When looking at safety and soundness, the higher the capital, the better.

The First National Bank of Jackson exceeded the national average of 13.13 points on our test to measure the adequacy of a bank's capital, achieving a score of 18 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. The First National Bank of Jackson's Tier 1 capital ratio was 32.16 percent, higher than the 6 percent level regulators consider adequate, and higher than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to economic challenges.

Overall, The First National Bank of Jackson held equity amounting to 13.51 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to estimate the impact of troubled assets, such as unpaid loans, on the bank's loan loss reserves and overall capitalization.

Having extensive holdings of these kinds of assets means a bank may have to use capital to absorb losses, reducing its buffer of equity. Many of those assets are also likely to be in non-accrual status and no longer earning money, resulting in diminished earnings and potentially more risk of a future failure.

On Bankrate's test of asset quality, The First National Bank of Jackson scored 36 out of a possible 40 points, lower than 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, 2.99 percent of The First National Bank of Jackson'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 problem 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 problem loans. Unfortunately, the FDIC did not provide information on The First National Bank of Jackson's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money affects its safety and soundness. A bank can retain its earnings, boosting its capital cushion, or put them to work addressing problematic loans, likely making the bank better prepared to withstand financial trouble. However, banks that are losing money have less ability to do those things.

The First National Bank of Jackson scored 0 out of a possible 30 on Bankrate's test of earnings, coming in below the national average of 15.12.

One widely used measure of a bank's earnings is return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity. The most recent annualized quarterly return on equity for The First National Bank of Jackson was -0.88 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $-130,000 on total equity of $14.3 million. The bank experienced an annualized return on average assets, or ROA, of -0.12 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.