Safe and Sound

Edmonton State Bank

Glasgow, KY
5
Star Rating
Started in 1899, Edmonton State Bank is an FDIC-insured bank headquartered in Glasgow, KY. Regulatory filings show the bank having equity of $70.2 million on $490.3 million in assets, as of December 31, 2017.

U.S. bank customers have $401.5 million on deposit at 13 offices in KY run by 146 full-time employees. With that footprint, the bank has amassed loans and leases worth $376.0 million, including real estate loans of $293.7 million.

Overall, Bankrate believes that, as of December 31, 2017, Edmonton State Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a breakdown of how the bank did on the three major criteria Bankrate used to evaluate American banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital is an essential measurement of a bank's financial strength. It acts as a buffer against losses and as protection for depositors during periods of economic instability for the bank. When looking at safety and soundness, the higher the capital, the better.

Edmonton State Bank achieved a score of 20 out of a possible 30 points on our test to measure the adequacy of a bank's capital, better than the national average of 13.13.

A bank's Tier 1 capital ratio is a widely used measure of this buffer. Edmonton State Bank's Tier 1 capital ratio was 17.64 percent, above 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 difficulties.

Overall, Edmonton State Bank held equity amounting to 14.32 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to estimate the effect of problem assets, such as past-due loans, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

A bank with lots of these types of assets could eventually have to use capital to absorb losses, decreasing its buffer of equity. 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, decreasing earnings and elevating the risk of a future failure.

On Bankrate's asset quality test, Edmonton State Bank scored 40 out of a possible 40 points, exceeding the national average of 37.49 points.

A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.51 percent of Edmonton State Bank's loans were noncurrent, meaning 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 maintain a reserve to deal with problem assets known as an "allowance for loan and lease losses." Comparing the size of that reserve to the total amount of at-risk loans can be a helpful indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Edmonton State Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability affects its long-term survivability. A bank can retain its earnings, expanding its capital buffer, or put them to work addressing problematic loans, potentially making the bank more resilient in times of trouble. Conversely, losses lessen a bank's ability to do those things.

On Bankrate's earnings test, Edmonton State Bank scored 22 out of a possible 30, beating the national average of 15.12.

One widely used way to measure a bank's earnings is return on equity, calculated by dividing net income (profit, essentially) by total equity. Edmonton State Bank's most recent annualized quarterly return on equity was 12.66 percent, above the national average of 8.10 percent.

The bank recorded net income of $8.7 million on total equity of $70.2 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 1.79 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.