Safe and Sound

Bank of the Mountains, Inc.

West Liberty, KY
4
Star Rating
Started in 1973, Bank of the Mountains, Inc. is an FDIC-insured bank headquartered in West Liberty, KY. Regulatory filings show the bank having equity of $7.3 million on assets of $67.4 million, as of December 31, 2017.

U.S. bank customers have $58.9 million on deposit at 3 offices in KY run by 27 full-time employees. With that footprint, the bank currently holds loans and leases worth $51.4 million, including $33.3 million worth of real estate loans.

Overall, Bankrate believes that, as of December 31, 2017, Bank of the Mountains, Inc. exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a look at how the bank fared on the three important criteria Bankrate used to grade U.S. banks.

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SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital is an important measurement of an institution's financial fortitude. It works as a buffer against losses and affords protection for depositors when a bank is struggling financially. When looking at safety and soundness, the higher the capital, the better.

On our test to measure the adequacy of a bank's capital, Bank of the Mountains, Inc. received a score of 12 out of a possible 30 points, below the national average of 13.13.

A bank's Tier 1 capital ratio is a widely followed measure of this buffer. Bank of the Mountains, Inc.'s Tier 1 capital ratio was 14.41 percent, above the 6 percent level regulators consider adequate, but lower than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to financial headwinds.

Overall, Bank of the Mountains, Inc. held equity amounting to 10.84 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test is intended to estimate how the bank's loan loss reserves and overall capitalization could be affected by problem assets, such as unpaid loans.

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

Bank of the Mountains, Inc. fell short of 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, 1.42 percent of Bank of the Mountains, Inc.'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 maintain a reserve known as an "allowance for loan and lease losses" to deal with problem assets . That reserve's size can be a handy indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on Bank of the Mountains, Inc.'s loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its safety and soundness. Earnings can be retained by the bank, giving a boost to its capital cushion, or be used to address problematic loans, likely making the bank more resilient in tough times. Obviously, banks that are losing money have less ability to do those things.

On Bankrate's earnings test, Bank of the Mountains, Inc. scored 14 out of a possible 30, less than the national average of 15.12.

One widely used measure of a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by total equity. The most recent annualized quarterly return on equity for Bank of the Mountains, Inc. was 6.92 percent, below the national average of 8.10 percent.

The bank earned net income of $496,000 on total equity of $7.3 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.73 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.