Safe and Sound

Bank of Columbia

Columbia, KY
5
Star Rating
Bank of Columbia is an FDIC-insured bank founded in 1866 and currently based in Columbia, KY. As of December 31, 2017, the bank held equity of $13.6 million on $134.5 million in assets.

Thanks to the work of 35 full-time employees in 3 offices in KY, the bank holds loans and leases worth $103.0 million, $76.5 million of which are for real estate. U.S. bank customers currently have $111.9 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Bank of Columbia exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for an analysis 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 bulwark against losses and provides protection for depositors during times of financial instability for the bank. It follows then that a bank's level of capital is a crucial measurement of a bank's financial strength. From a safety and soundness perspective, the higher the capital, the better.

Bank of Columbia 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 important measure of this buffer is a bank's Tier 1 capital ratio. Bank of Columbia's Tier 1 capital ratio was 13.64 percent, higher than the 6 percent level regulators consider adequate, but less than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather financial challenges.

Overall, Bank of Columbia held equity amounting to 10.12 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to estimate how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by troubled assets, such as unpaid loans.

Having a large number of these kinds of assets means a bank could 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 money, resulting in lower earnings and potentially more risk of a future failure.

Bank of Columbia finished 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, 1.16 percent of Bank of Columbia's loans were noncurrent -- in other words, 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 keep a reserve known as an "allowance for loan and lease losses" to deal with problem assets . How large that reserve is can be a helpful 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 Bank of Columbia's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability has an effect on its safety and soundness. A bank can retain its earnings, giving a boost to its capital cushion, or use them to address problematic loans, likely making the bank better able to withstand financial trouble. Banks that are losing money, however, are less able to do those things.

On Bankrate's test of earnings, Bank of Columbia scored 30 out of a possible 30, beating the national average of 15.12.

Return on equity, calculated by dividing net income (essentially, profit) by total equity, is one key measure of a bank's earnings. The most recent annualized quarterly return on equity for Bank of Columbia was 22.35 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $3.0 million on total equity of $13.6 million. The bank had an annualized return on average assets, or ROA, of 2.26 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.