Safe and Sound

Kentucky Federal Savings and Loan Association

Covington, KY
2
Star Rating
Started in 1885, Kentucky Federal Savings and Loan Association is an FDIC-insured bank based in Covington, KY. Regulatory filings show the bank having equity of $3.0 million on assets of $31.4 million, as of December 31, 2017.

U.S. bank customers have $27.7 million on deposit at 3 offices in KY run by 10 full-time employees. With that footprint, the bank has amassed loans and leases worth $16.1 million, $16.1 million of which are for real estate.

Overall, Bankrate believes that, as of December 31, 2017, Kentucky Federal Savings and Loan Association exhibited a below-average condition, earning 2 out of 5 stars for safety and soundness. Keep reading for a look at how the bank did on the three major criteria Bankrate used to grade U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a bulwark against losses and as protection for depositors when a bank is struggling financially. Therefore, when it comes to measuring an a bank's financial fortitude, capital is important. When looking at safety and soundness, the higher the capital, the better.

On our test to measure the adequacy of a bank's capital, Kentucky Federal Savings and Loan Association received a score of 10 out of a possible 30 points, below the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Kentucky Federal Savings and Loan Association's Tier 1 capital ratio was 23.98 percent, above the 6 percent level regulators consider adequate, but below the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather economic challenges.

Overall, Kentucky Federal Savings and Loan Association held equity amounting to 9.56 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

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

A bank with lots of these kinds of assets may eventually have to use capital to cover losses, cutting down on its cushion of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning interest for the bank, resulting in depressed earnings and potentially more risk of a failure in the future.

Kentucky Federal Savings and Loan Association fell below the national average of 37.49 on Bankrate's asset quality test, racking up 32 out of a possible 40 points .

A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 1.86 percent of Kentucky Federal Savings and Loan Association'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 known as an "allowance for loan and lease losses" to deal with problem assets . Comparing the reserve's size to the total amount of problematic loans can be a helpful indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Kentucky Federal Savings and Loan Association's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its long-term survivability. A bank can retain its earnings, expanding its capital cushion, or use them to deal with problematic loans, potentially making the bank more resilient in tough times. Losses, on the other hand, lessen a bank's ability to do those things.

Kentucky Federal Savings and Loan Association scored 0 out of a possible 30 on Bankrate's test of earnings, less than the national average of 15.12.

One important measure of a bank's earnings is return on equity, or net income (profit, essentially) divided by the total amount of equity. Kentucky Federal Savings and Loan Association's most recent annualized quarterly return on equity was -0.20 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $-6,000 on total equity of $3.0 million. The bank had an annualized return on average assets, or ROA, of -0.02 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.