Safe and Sound

TOWN SQUARE BANK

Ashland, KY
3
Star Rating
Ashland, KY-based TOWN SQUARE BANK is an FDIC-insured bank founded in 1889. As of December 31, 2017, the bank had equity of $55.9 million on $446.8 million in assets.

U.S. bank customers have $374.4 million on deposit at 10 offices in KY run by 109 full-time employees. With that footprint, the bank has amassed loans and leases worth $328.8 million, $282.5 million of which are for real estate.

Overall, Bankrate believes that, as of December 31, 2017, TOWN SQUARE BANK exhibited a generally satisfactory condition, earning 3 out of 5 stars for safety and soundness. Keep reading for a look at how the bank fared on the three key criteria Bankrate used to evaluate American banks.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial strength, capital is crucial. It acts as a cushion against losses and affords protection for depositors when a bank is struggling financially. From a safety and soundness perspective, more capital is preferred.

TOWN SQUARE BANK beat out the national average of 13.13 points on our test to measure the adequacy of a bank's capital, achieving a score of 14 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. TOWN SQUARE BANK's Tier 1 capital ratio was 17.85 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 stand up to economic headwinds.

Overall, TOWN SQUARE BANK held equity amounting to 12.52 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 unpaid loans, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

A bank with lots of these kinds of assets could eventually be required 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 increasing the chances of a future failure.

On Bankrate's asset quality test, TOWN SQUARE BANK scored 36 out of a possible 40 points, failing to reach the national average of 37.49 points.

The percentage of problem assets a bank holds compared to its total assets is a useful indicator of asset quality.As of December 31, 2017, 1.91 percent of TOWN SQUARE BANK'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 to deal with problem assets known as an "allowance for loan and lease losses." Comparing how large that reserve is 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 TOWN SQUARE BANK's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money has an effect on its safety and soundness. A bank can retain its earnings, increasing its capital buffer, or put them to work addressing problematic loans, likely making the bank more resilient in tough times. Conversely, losses take away from a bank's ability to do those things.

TOWN SQUARE BANK underperformed the average on Bankrate's test of earnings, achieving a score of 0 out of a possible 30.

One important way to measure 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 TOWN SQUARE BANK was -3.68 percent, below the national average of 8.10 percent.

The bank recorded net income of $-2.3 million on total equity of $55.9 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of -0.51 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.