Safe and Sound

The First National Bank of Russell Springs

Russell Springs, KY
4
Star Rating
Russell Springs, KY-based The First National Bank of Russell Springs is an FDIC-insured bank started in 1906. As of December 31, 2017, the bank had equity of $25.8 million on $212.9 million in assets.

With 36 full-time employees in 3 offices in KY, the bank has amassed loans and leases worth $101.3 million, including real estate loans of $80.1 million. U.S. bank customers currently have $184.7 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, The First National Bank of Russell Springs exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a breakdown of how the bank did on the three major criteria Bankrate used to evaluate U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial strength, capital is key. It acts as a bulwark against losses and as protection for accountholders when a bank is struggling financially. When it comes to safety and soundness, the more capital, the better.

The First National Bank of Russell Springs beat out the national average of 13.13 points on our test to measure the adequacy of a bank's capital, scoring 16 out of a possible 30 points.

A bank's Tier 1 capital ratio is an essential measure of this buffer. The First National Bank of Russell Springs's Tier 1 capital ratio was 20.69 percent, above the 6 percent level considered adequate by regulators, but less 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 difficulties.

Overall, The First National Bank of Russell Springs held equity amounting to 12.14 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

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

Having lots of these kinds of assets suggests a bank could eventually have to use capital to absorb losses, diminishing its equity cushion. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, resulting in lower earnings and potentially more risk of a failure in the future.

The First National Bank of Russell Springs fell below the national average of 37.49 on Bankrate's test of asset quality, racking up 36 out of a possible 40 points .

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, 1.77 percent of The First National Bank of Russell Springs'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 keep a reserve known as an "allowance for loan and lease losses" to deal with problem assets . Comparing the size of that reserve to the total amount of problematic loans can be a useful indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on The First National Bank of Russell Springs's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its safety and soundness. A bank can retain its earnings, giving a boost to its capital cushion, or put them to work addressing problematic loans, likely making the bank more resilient in times of trouble. However, banks that are losing money have less ability to do those things.

The First National Bank of Russell Springs underperformed the average on Bankrate's test of earnings, achieving a score of 12 out of a possible 30.

Return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity, is one important measure of a bank's earnings. The First National Bank of Russell Springs's most recent annualized quarterly return on equity was 5.60 percent, below the national average of 8.10 percent.

The bank earned net income of $1.5 million on total equity of $25.8 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 0.70 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.