Safe and Sound

The First State Bank & Trust Co. of Larned

Larned, KS
5
Star Rating
The First State Bank & Trust Co. of Larned is an FDIC-insured bank founded in 1896 and currently based in Larned, KS. Regulatory filings show the bank having equity of $18.8 million on $150.8 million in assets, as of December 31, 2017.

With 22 full-time employees in 4 offices in KS, the bank has amassed loans and leases worth $79.1 million, including real estate loans of $54.6 million. U.S. bank customers currently have $115.3 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, The First State Bank & Trust Co. of Larned 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 major criteria Bankrate used to score American banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a cushion against losses and as protection for depositors when a bank is experiencing financial trouble. Therefore, a bank's level of capital is a useful measurement of a bank's financial resilience. When looking at safety and soundness, more capital is preferred.

The First State Bank & Trust Co. of Larned beat out the national average of 13.13 points on our test to measure the adequacy of a bank's capital, receiving a score of 16 out of a possible 30 points.

A bank's Tier 1 capital ratio is a widely used measure of this buffer. The First State Bank & Trust Co. of Larned's Tier 1 capital ratio was 19.95 percent, higher than the 6 percent level considered adequate by regulators, 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 State Bank & Trust Co. of Larned held equity amounting to 12.43 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to determine the effect of troubled assets, such as past-due loans, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

A bank with extensive holdings of these types of assets may eventually be required to use capital to cover losses, reducing its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, pushing down earnings and elevating the risk of a future failure.

The First State Bank & Trust Co. of Larned scored 40 out of a possible 40 points on Bankrate's asset quality test, beating out the national average of 37.49.

The percentage of problem assets a bank holds compared to its total assets is a widely used indicator of asset quality.As of December 31, 2017, 0.11 percent of The First State Bank & Trust Co. of Larned's loans were noncurrent, meaning 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 known as an "allowance for loan and lease losses" to deal with problem assets . How large that reserve is can be a widely used indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problem loans. The First State Bank & Trust Co. of Larned's loan loss allowance was 1,830.59 percent of its total noncurrent loans, higher than the national average. All things being equal, a higher ratio of loan loss allowance to noncurrent loans is better.

Earnings score

How profitable a bank is affects its long-term survivability. Earnings can be retained by the bank, increasing its capital cushion, or be used to address problematic loans, likely making the bank more resilient in tough times. Obviously, banks that are losing money are less able to do those things.

The First State Bank & Trust Co. of Larned received above-average marks on Bankrate's test of earnings, achieving a score of 20 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 the total amount of equity. The most recent annualized quarterly return on equity for The First State Bank & Trust Co. of Larned was 10.89 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $2.0 million on total equity of $18.8 million. The bank experienced an annualized return on average assets, or ROA, of 1.38 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.