Safe and Sound

Bank of Hindman

Hindman, KY
4
Star Rating
Started in 1903, Bank of Hindman is an FDIC-insured bank based in Hindman, KY. As of December 31, 2017, the bank held equity of $24.7 million on assets of $193.0 million.

U.S. bank customers have $154.6 million on deposit at 3 offices in KY run by 30 full-time employees. With that footprint, the bank currently holds loans and leases worth $84.4 million, $71.7 million of which are for real estate.

Overall, Bankrate believes that, as of December 31, 2017, Bank of Hindman exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a look at how the bank did on the three key criteria Bankrate used to score U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital is a valuable measurement of an institution's financial fortitude. It works as a cushion against losses and affords protection for depositors when a bank is experiencing financial trouble. When it comes to safety and soundness, more capital is better.

On our test to measure the adequacy of a bank's capital, Bank of Hindman received a score of 10 out of a possible 30 points, below the national average of 13.13.

One essential measure of this buffer is a bank's Tier 1 capital ratio. Bank of Hindman's Tier 1 capital ratio was 15.51 percent, above the 6 percent level considered adequate by regulators, but below the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to economic challenges.

Overall, Bank of Hindman held equity amounting to 12.79 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

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

Having large numbers of these types of assets suggests a bank could eventually have to use capital to cover losses, shrinking its equity cushion. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, diminishing earnings and elevating the chances of a future failure.

On Bankrate's test of asset quality, Bank of Hindman scored 36 out of a possible 40 points, less than the national average of 37.49 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, 1.38 percent of Bank of Hindman'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 keep a reserve to handle troubled assets known as an "allowance for loan and lease losses." That reserve's size can be a helpful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on Bank of Hindman's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its long-term survivability. Earnings can be retained by the bank, increasing its capital cushion, or be used to address problematic loans, likely making the bank better able to withstand economic trouble. Obviously, banks that are losing money have less ability to do those things.

On Bankrate's earnings test, Bank of Hindman scored 10 out of a possible 30, failing to reach the national average of 15.12.

One widely used measure of a bank's earnings is return on equity, or net income (profit, basically) divided by the total amount of equity. The most recent annualized quarterly return on equity for Bank of Hindman was 4.70 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $1.2 million on total equity of $24.7 million. The bank had an annualized return on average assets, or ROA, of 0.60 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.