Safe and Sound

The Fountain Trust Company

Covington, IN
4
Star Rating
Covington, IN-based The Fountain Trust Company is an FDIC-insured bank started in 1903. The bank holds equity of $42.2 million on assets of $368.3 million, according to December 31, 2017, regulatory filings.

U.S. bank customers have $322.1 million on deposit at 15 offices in IN run by 115 full-time employees. With that footprint, the bank currently holds loans and leases worth $227.6 million, including real estate loans of $180.0 million.

Overall, Bankrate believes that, as of December 31, 2017, The Fountain Trust Company exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a look at how the bank fared on the three key criteria Bankrate used to score American banks.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial resilience, capital is useful. It works as a bulwark against losses and affords protection for accountholders when a bank is struggling financially. When it comes to safety and soundness, the higher the capital, the better.

On our test to measure capital adequacy, The Fountain Trust Company received a score of 12 out of a possible 30 points, below the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. The Fountain Trust Company's Tier 1 capital ratio was 16.60 percent, exceeding the 6 percent level considered adequate by regulators, but below the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather financial difficulties.

Overall, The Fountain Trust Company held equity amounting to 11.47 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 effect of troubled assets, such as past-due loans, on the bank's capitalization and allocated loan loss reserves.

Having lots of these kinds of assets could eventually require a bank to use capital to absorb losses, diminishing 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, resulting in diminished earnings and potentially more risk of a failure in the future.

The Fountain Trust Company scored above the national average of 37.49 on Bankrate's test of asset quality, racking up 40 out of a possible 40 points .

A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.88 percent of The Fountain Trust Company'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 maintain a reserve to deal with troubled assets known as an "allowance for loan and lease losses." That reserve's size can be a handy indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on The Fountain Trust Company's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money has an effect on its long-term survivability. Earnings may be retained by the bank, boosting its capital buffer, 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 Fountain Trust Company scored 10 out of a possible 30 on Bankrate's earnings test, coming in below the national average of 15.12.

One widely used way to measure a bank's earnings is return on equity, or net income (essentially profit) divided by the total amount of equity. The most recent annualized quarterly return on equity for The Fountain Trust Company was 4.08 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $1.8 million on total equity of $42.2 million. The bank had an annualized return on average assets, or ROA, of 0.54 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.