Safe and Sound

Independence Bank of Kentucky

Owensboro, KY
5
Star Rating
Founded in 1909, Independence Bank of Kentucky is an FDIC-insured bank headquartered in Owensboro, KY. Regulatory filings show the bank having equity of $161.8 million on $2.17 billion in assets, as of December 31, 2017.

With 365 full-time employees in 25 offices in KY, the bank holds loans and leases worth $1.25 billion, including real estate loans of $1.09 billion. U.S. bank customers currently have $1.65 billion in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Independence Bank of Kentucky exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a breakdown of how the bank did on the three key criteria Bankrate used to evaluate American banks on safety and soundness.

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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 accountholders when a bank is experiencing financial instability. When looking at safety and soundness, the more capital, the better.

Independence Bank of Kentucky received a score of 6 out of a possible 30 points on our test to measure the adequacy of a bank's capital, failing to reach the national average of 13.13.

A bank's Tier 1 capital ratio is an essential measure of this buffer. Independence Bank of Kentucky's Tier 1 capital ratio was 10.94 percent, above the 6 percent level considered adequate by regulators, but under the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to economic headwinds.

Overall, Independence Bank of Kentucky held equity amounting to 7.45 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 capitalization and allocated loan loss reserves could be affected by troubled assets, such as unpaid mortgages.

Having large numbers of these kinds of assets may eventually require a bank to use capital to absorb losses, shrinking 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 money, resulting in lower earnings and potentially more risk of a future failure.

Independence Bank of Kentucky scored 40 out of a possible 40 points on Bankrate's test of asset quality, exceeding the national average of 37.49.

The percentage of problem assets a bank holds compared to its total assets is a widely used indicator of asset quality.As of December 31, 2017, 0.25 percent of Independence Bank of Kentucky'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 keep a reserve to deal with problem assets known as an "allowance for loan and lease losses." How large that reserve is can be a useful 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 Independence Bank of Kentucky'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 cushion, or use them to deal with problematic loans, likely making the bank better able to withstand economic shocks. Banks that are losing money, however, are less able to do those things.

Independence Bank of Kentucky scored 28 out of a possible 30 on Bankrate's test of earnings, beating out the national average of 15.12.

Return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for Independence Bank of Kentucky was 20.65 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $31.9 million on total equity of $161.8 million. The bank had an annualized return on average assets, or ROA, of 1.51 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.