Safe and Sound

United Community Bank of West Kentucky, Inc.

Morganfield, KY
5
Star Rating
United Community Bank of West Kentucky, Inc. is an FDIC-insured bank founded in 2001 and currently based in Morganfield, KY. Regulatory filings show the bank having equity of $32.1 million on assets of $247.6 million, as of December 31, 2017.

U.S. bank customers have $193.5 million on deposit at 4 offices in KY run by 52 full-time employees. With that footprint, the bank currently holds loans and leases worth $164.3 million, including $100.2 million worth of real estate loans.

Overall, Bankrate believes that, as of December 31, 2017, United Community Bank of West Kentucky, Inc. 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 major criteria Bankrate used to evaluate U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a bulwark against losses and provides protection for account holders when a bank is experiencing economic instability. Therefore, when it comes to measuring an an institution's financial fortitude, capital is crucial. When looking at safety and soundness, the higher the capital, the better.

On our test to measure capital adequacy, United Community Bank of West Kentucky, Inc. scored 16 out of a possible 30 points, beating out the national average of 13.13.

One important measure of this buffer is a bank's Tier 1 capital ratio. United Community Bank of West Kentucky, Inc.'s Tier 1 capital ratio was 16.98 percent, above the 6 percent level regulators consider adequate, but lower than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather financial downturns.

Overall, United Community Bank of West Kentucky, Inc. held equity amounting to 12.97 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to estimate the impact of troubled 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 a large number of these types of assets may eventually have to use capital to cover losses, cutting down on its buffer of equity. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, diminishing earnings and elevating the risk of a failure in the future.

On Bankrate's asset quality test, United Community Bank of West Kentucky, Inc. scored 40 out of a possible 40 points, better than the national average of 37.49 points.

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, 0.12 percent of United Community Bank of West Kentucky, Inc.'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 known as an "allowance for loan and lease losses" to deal with problem assets . How large that reserve is can be a widely used indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problematic loans. United Community Bank of West Kentucky, Inc.'s loan loss allowance was 1,247.98 percent of its total noncurrent loans, exceeding the national average. All things being equal, a higher ratio of loan loss allowance to noncurrent loans is better.

Earnings score

A bank's ability to earn money affects its safety and soundness. A bank can retain its earnings, increasing its capital buffer, or use them to address problematic loans, likely making the bank better prepared to withstand financial trouble. Conversely, losses take away from a bank's ability to do those things.

United Community Bank of West Kentucky, Inc. outperformed the average on Bankrate's test of earnings, achieving a score of 20 out of a possible 30.

One important measure of a bank's earnings is return on equity, or net income (essentially profit) divided by total equity. The most recent annualized quarterly return on equity for United Community Bank of West Kentucky, Inc. was 10.96 percent, above the national average of 8.10 percent.

The bank recorded net income of $3.5 million on total equity of $32.1 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 1.42 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.