Safe and Sound

The First National Bank of Scott City

Scott City, KS
3
Star Rating
Scott City, KS-based The First National Bank of Scott City is an FDIC-insured bank started in 1902. As of December 31, 2017, the bank had equity of $14.2 million on assets of $121.3 million.

Thanks to the work of 24 full-time employees, the bank has amassed loans and leases worth $76.5 million, including real estate loans of $20.6 million. U.S. bank customers currently have $106.5 million in deposits with the bank.

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

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a cushion against losses and affords protection for depositors when a bank is struggling financially. It follows then that a bank's level of capital is a useful measurement of an institution's financial fortitude. When it comes to safety and soundness, the higher the capital, the better.

The First National Bank of Scott City beat out the national average of 13.13 points on our test to measure capital adequacy, receiving a score of 14 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 Scott City's Tier 1 capital ratio was 13.60 percent, above 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 weather financial downturns.

Overall, The First National Bank of Scott City held equity amounting to 11.67 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test is intended to try to understand how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by problem assets, such as unpaid loans.

Having extensive holdings of these types of assets means a bank could eventually have to use capital to absorb 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, resulting in lower earnings and potentially more risk of a failure in the future.

The First National Bank of Scott City came in below the national average of 37.49 on Bankrate's test of asset quality, racking up 28 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, 4.50 percent of The First National Bank of Scott City's loans were noncurrent, meaning 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 . Comparing the size of that reserve to the total amount of problem loans can be a helpful indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on The First National Bank of Scott City's loan loss allowance in its most recent filings.

Earnings score

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

The First National Bank of Scott City received below-average marks on Bankrate's test of earnings, achieving a score of 8 out of a possible 30.

One key way to measure a bank's earnings is return on equity, or net income (profit, basically) divided by the total amount of equity. The First National Bank of Scott City's most recent annualized quarterly return on equity was 4.04 percent, below the national average of 8.10 percent.

The bank recorded net income of $565,000 on total equity of $14.2 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.47 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.