Safe and Sound

United Southern Bank

Hopkinsville, KY
3
Star Rating
Started in 1922, United Southern Bank is an FDIC-insured bank headquartered in Hopkinsville, KY. Regulatory filings show the bank having equity of $24.5 million on $230.6 million in assets, as of December 31, 2017.

With 65 full-time employees in 9 offices in KY, the bank has amassed loans and leases worth $161.8 million, including real estate loans of $141.7 million. U.S. bank customers currently have $192.1 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, United Southern Bank exhibited a generally satisfactory condition, earning 3 out of 5 stars for safety and soundness. Keep reading for an analysis of how the bank did on the three key criteria Bankrate used to evaluate American banks.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a cushion against losses and as protection for depositors during periods of financial trouble for the bank. Therefore, a bank's level of capital is a useful measurement of an institution's financial fortitude. When looking at safety and soundness, more capital is preferred.

United Southern Bank received a score of 12 out of a possible 30 points on our test to measure capital adequacy, below the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. United Southern Bank's Tier 1 capital ratio was 14.46 percent, exceeding the 6 percent level considered adequate by regulators, but below the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather economic difficulties.

Overall, United Southern Bank held equity amounting to 10.65 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to try to understand how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by troubled assets, such as past-due mortgages.

A bank with large numbers of these types of assets could eventually have to use capital to absorb losses, diminishing its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, reducing earnings and increasing the chances of a failure in the future.

On Bankrate's test of asset quality, United Southern Bank scored 32 out of a possible 40 points, failing to reach the national average of 37.49 points.

A helpful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 1.41 percent of United Southern 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 keep a reserve to deal with troubled assets known as an "allowance for loan and lease losses." 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. Unfortunately, the FDIC did not provide information on United Southern Bank'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, boosting its capital cushion, or put them to work addressing problematic loans, likely making the bank better able to withstand economic shocks. Conversely, losses diminish a bank's ability to do those things.

United Southern Bank received below-average marks on Bankrate's earnings test, achieving a score of 8 out of a possible 30.

Return on equity, calculated by dividing net income (essentially, profit) 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 United Southern Bank was 3.65 percent, below the national average of 8.10 percent.

The bank reported net income of $900,000 on total equity of $24.5 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 0.38 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.