Safe and Sound

Auburn Banking Company

Auburn, KY
5
Star Rating
Auburn Banking Company is an FDIC-insured bank founded in 1929 and currently headquartered in Auburn, KY. As of December 31, 2017, the bank held equity of $6.6 million on $79.5 million in assets.

With 20 full-time employees in 2 offices in KY, the bank currently holds loans and leases worth $57.5 million, including real estate loans of $46.4 million. U.S. bank customers currently have $71.7 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Auburn Banking Company exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a breakdown of how the bank fared on the three key criteria Bankrate used to evaluate U.S. banks on safety and soundness.

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SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a cushion against losses and provides protection for account holders when a bank is struggling financially. It follows then that when it comes to measuring an an institution's financial stability, capital is important. When it comes to safety and soundness, the more capital, the better.

Auburn Banking Company received a score of 8 out of a possible 30 points on our test to measure capital adequacy, below the national average of 13.13.

A bank's Tier 1 capital ratio is an essential measure of this buffer. Auburn Banking Company's Tier 1 capital ratio was 12.19 percent, above the 6 percent level regulators consider adequate, but below the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather financial headwinds.

Overall, Auburn Banking Company held equity amounting to 8.30 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 impact of troubled assets, such as past-due loans, on the bank's capitalization and allocated loan loss reserves.

Having a large number of these types of assets could eventually force a bank to use capital to absorb losses, cutting down on its buffer of equity. Many of those assets are also likely to be in non-accrual status and no longer earning money, reducing earnings and increasing the chances of a failure in the future.

Auburn Banking Company scored below the national average of 37.49 on Bankrate's test of asset quality, racking up 36 out of a possible 40 points .

The percentage of problem assets a bank holds compared to its total assets is a handy indicator of asset quality.As of December 31, 2017, 2.67 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 1.01 percent.

Banks maintain a reserve to deal with problem assets known as an "allowance for loan and lease losses." That reserve's size can be a useful 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 Auburn Banking Company's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability affects its safety and soundness. Earnings may be retained by the bank, giving a boost to its capital cushion, or be used to deal with problematic loans, potentially making the bank better prepared to withstand economic shocks. Losses, on the other hand, lessen a bank's ability to do those things.

Auburn Banking Company outperformed the average on Bankrate's test of earnings, achieving a score of 28 out of a possible 30.

One widely used measure of a bank's earnings is return on equity, or net income (profit, essentially) divided by total equity. Auburn Banking Company's most recent annualized quarterly return on equity was 18.52 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $1.2 million on total equity of $6.6 million. The bank reported an annualized return on average assets, or ROA, of 1.52 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.