Safe and Sound

The Lincoln National Bank of Hodgenville

Hodgenville, KY
5
Star Rating
Founded in 1930, The Lincoln National Bank of Hodgenville is an FDIC-insured bank based in Hodgenville, KY. The bank has equity of $35.3 million on assets of $281.4 million, according to December 31, 2017, regulatory filings.

U.S. bank customers have $236.0 million on deposit at 5 offices in KY run by 100 full-time employees. With that footprint, the bank currently holds loans and leases worth $208.3 million, $182.4 million of which are for real estate.

Overall, Bankrate believes that, as of December 31, 2017, The Lincoln National Bank of Hodgenville exhibited a superior condition, earning a full 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 U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a buffer against losses and affords protection for depositors during periods of financial trouble for the bank. It follows then that when it comes to measuring an a bank's financial strength, capital is important. When it comes to safety and soundness, more capital is better.

On our test to measure capital adequacy, The Lincoln National Bank of Hodgenville racked up 16 out of a possible 30 points, beating the national average of 13.13.

A bank's Tier 1 capital ratio is a widely followed measure of this buffer. The Lincoln National Bank of Hodgenville's Tier 1 capital ratio was 18.47 percent, above the 6 percent level considered adequate by regulators, but less than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to economic downturns.

Overall, The Lincoln National Bank of Hodgenville held equity amounting to 12.55 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to estimate the effect of troubled assets, such as past-due loans, on the bank's loan loss reserves and overall capitalization.

Having large numbers of these kinds of assets means a bank could eventually have to use capital to cover losses, cutting down on its equity buffer. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, pushing down earnings and elevating the risk of a future failure.

On Bankrate's asset quality test, The Lincoln National Bank of Hodgenville scored 40 out of a possible 40 points, above the national average of 37.49 points.

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, 0.36 percent of The Lincoln National Bank of Hodgenville'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 to deal with troubled assets known as an "allowance for loan and lease losses." The size of that reserve can be a helpful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on The Lincoln National Bank of Hodgenville's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance 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, potentially making the bank better prepared to withstand economic shocks. Conversely, losses lessen a bank's ability to do those things.

The Lincoln National Bank of Hodgenville scored 18 out of a possible 30 on Bankrate's test of earnings, exceeding the national average of 15.12.

Return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity, is one widely used measure of a bank's earnings. The Lincoln National Bank of Hodgenville's most recent annualized quarterly return on equity was 8.15 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $2.9 million on total equity of $35.3 million. The bank had an annualized return on average assets, or ROA, of 1.04 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.