Safe and Sound

Auburn Banking Company

Auburn, KY
4
Star Rating
Auburn, KY-based Auburn Banking Company is an FDIC-insured bank founded in 1929. The bank holds equity of $6.4 million on assets of $78.3 million, according to June 30, 2017, regulatory filings.

Thanks to the work of 21 full-time employees in 2 offices in KY, the bank holds loans and leases worth $56.0 million, including real estate loans of $41.9 million. U.S. bank customers currently have $70.7 million in deposits with the bank.

Overall, Bankrate believes that, as of June 30, 2017, Auburn Banking Company exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a look at how the bank faired on the three important criteria Bankrate used to grade U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial fortitude, capital is important. It works as a bulwark against losses and provides protection for depositors when a bank is struggling financially. When looking at safety and soundness, the higher the capital, the better.
Auburn Banking Company received a score of 8 out of a possible 30 points on our test to measure the adequacy of a bank's capital, failing to reach the national average of 13.38.

One essential measure of this buffer is a bank's Tier 1 capital ratio. Auburn Banking Company's Tier 1 capital ratio was 11.59 percent, higher than the 6 percent level considered adequate by regulators, but under the national average of 25.16 percent. The higher the capital ratio, the better the bank will be able to weather economic headwinds.

Overall, Auburn Banking Company held equity amounting to 8.13 percent of its assets, which was lower than the national average of 12.10 percent.

Asset Quality Score

This test's purpose is to estimate how the bank's capitalization and allocated loan loss reserves could be affected by problem assets, such as past-due mortgages.

A bank with large numbers of these kinds of assets could eventually have to use capital to cover losses, diminishing its equity cushion. 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 reduced earnings and potentially more risk of a future failure.

On Bankrate's test of asset quality, Auburn Banking Company scored 32 out of a possible 40 points, falling short of the national average of 37.62 points.

The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of June 30, 2017, 1.94 percent of Auburn Banking Company'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 1.04 percent.

Banks maintain a reserve to handle problem assets known as an "allowance for loan and lease losses." The size of that reserve can be a handy 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 Auburn Banking Company'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, increasing its capital cushion, or use them to deal with problematic loans, likely making the bank more resilient in tough times. However, banks that are losing money are less able to do those things.

Auburn Banking Company scored 24 out of a possible 30 on Bankrate's earnings test, beating out the national average of 16.52.

Return on equity, calculated by dividing net income (essentially, profit) by the total amount of equity, is one important way to measure a bank's earnings. Auburn Banking Company's most recent annualized quarterly return on equity was 15.85 percent, above the national average of 9.28 percent.

The bank reported net income of $506,000 on total equity of $6.4 million for the twelve months ended June 30, 2017. The bank reported an annualized return on average assets, or ROA, of 1.30 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above the average for U.S. banks of 1.14 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.