Safe and Sound

Winchester Federal Bank

Winchester, KY
5
Star Rating
Founded in 1934, Winchester Federal Bank is an FDIC-insured bank headquartered in Winchester, KY. As of December 31, 2017, the bank held equity of $18.2 million on assets of $150.0 million.

With 20 full-time employees in 2 offices in KY, the bank holds loans and leases worth $111.5 million, including real estate loans of $111.5 million. U.S. bank customers currently have $99.8 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Winchester Federal Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for an analysis of how the bank fared on the three important criteria Bankrate used to evaluate American banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial strength, capital is key. It works as a cushion against losses and provides protection for accountholders when a bank is struggling financially. When looking at safety and soundness, more capital is preferred.

Winchester Federal Bank beat out the national average of 13.13 points on our test to measure the adequacy of a bank's capital, racking up 16 out of a possible 30 points.

A bank's Tier 1 capital ratio is an essential measure of this buffer. Winchester Federal Bank's Tier 1 capital ratio was 22.56 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 stand up to economic downturns.

Overall, Winchester Federal Bank held equity amounting to 12.16 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test is intended to estimate how the bank's capitalization and allocated loan loss reserves could be affected by troubled assets, such as unpaid loans.

Having large numbers of these kinds of assets may eventually require a bank to use capital to cover losses, decreasing its equity buffer. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, diminishing earnings and elevating the chances of a failure in the future.

On Bankrate's asset quality test, Winchester Federal Bank scored 36 out of a possible 40 points, less than the national average of 37.49 points.

The percentage of problem assets a bank holds compared to its total assets is a handy indicator of asset quality.As of December 31, 2017, 1.06 percent of Winchester Federal Bank'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 maintain a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . How large that reserve is can be a handy indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on Winchester Federal Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its safety and soundness. Earnings can be retained by the bank, boosting its capital cushion, or be used to address problematic loans, likely making the bank better prepared to withstand financial shocks. Losses, on the other hand, reduce a bank's ability to do those things.

On Bankrate's earnings test, Winchester Federal Bank scored 20 out of a possible 30, beating out the national average of 15.12.

Return on equity, calculated by dividing net income (essentially, profit) by total equity, is one important measure of a bank's earnings. Winchester Federal Bank's most recent annualized quarterly return on equity was 10.53 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $1.9 million on total equity of $18.2 million. The bank had an annualized return on average assets, or ROA, of 1.32 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.