Safe and Sound

AuburnBank

Auburn, AL
5
Star Rating
Founded in 1907, AuburnBank is an FDIC-insured bank headquartered in Auburn, AL. Regulatory filings show the bank having equity of $88.7 million on $854.4 million in assets, as of December 31, 2017.

Thanks to the work of 154 full-time employees in 8 offices in AL, the bank has amassed loans and leases worth $450.8 million, including real estate loans of $371.8 million. U.S. bank customers currently have $758.8 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, AuburnBank 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 major criteria Bankrate used to evaluate American banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a cushion against losses and affords protection for depositors when a bank is experiencing economic instability. It follows then that a bank's level of capital is a crucial measurement of an institution's financial strength. From a safety and soundness perspective, more capital is preferred.

AuburnBank received a score of 12 out of a possible 30 points on our test to measure the adequacy of a bank's capital, coming in below the national average of 13.13.

One essential measure of this buffer is a bank's Tier 1 capital ratio. AuburnBank's Tier 1 capital ratio was 16.74 percent, above the 6 percent level regulators consider adequate, but under the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather financial downturns.

Overall, AuburnBank held equity amounting to 10.39 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test is intended to try to understand how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by troubled assets, such as past-due loans.

Having lots of these kinds of assets may eventually require a bank 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 thus aren't earning interest for the bank, resulting in diminished earnings and potentially more risk of a failure in the future.

On Bankrate's test of asset quality, AuburnBank scored 40 out of a possible 40 points, beating the national average of 37.49 points.

A handy indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.65 percent of AuburnBank's loans were noncurrent -- in other words, 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 handle troubled assets known as an "allowance for loan and lease losses." Comparing the reserve's size to the total amount of problem loans can be a helpful indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on AuburnBank's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance has an effect on its long-term survivability. Earnings may be retained by the bank, expanding its capital cushion, or be used to address problematic loans, likely making the bank better able to withstand economic shocks. Losses, on the other hand, lessen a bank's ability to do those things.

On Bankrate's earnings test, AuburnBank scored 18 out of a possible 30, above the national average of 15.12.

One widely used way to measure a bank's earnings is return on equity, or net income (profit, basically) divided by total equity. The most recent annualized quarterly return on equity for AuburnBank was 9.23 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $8.0 million on total equity of $88.7 million. The bank had an annualized return on average assets, or ROA, of 0.95 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.