Safe and Sound

Bank of Denton

Denton, KS
5
Star Rating
Founded in 1894, Bank of Denton is an FDIC-insured bank headquartered in Denton, KS. Regulatory filings show the bank having equity of $3.3 million on assets of $18.3 million, as of December 31, 2017.

With 4 full-time employees, the bank currently holds loans and leases worth $10.2 million, including real estate loans of $6.4 million. U.S. bank customers currently have $14.9 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Bank of Denton exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a look at how the bank fared on the three important 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 buffer against losses and provides protection for account holders during times of financial instability for the bank. It follows then that a bank's level of capital is a crucial measurement of a bank's financial strength. When looking at safety and soundness, more capital is better.

On our test to measure capital adequacy, Bank of Denton racked up 28 out of a possible 30 points, above the national average of 13.13.

One important measure of this buffer is a bank's Tier 1 capital ratio. Bank of Denton's Tier 1 capital ratio was 31.25 percent, exceeding the 6 percent level considered adequate by regulators, and exceeding the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather financial challenges.

Overall, Bank of Denton held equity amounting to 18.02 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to determine the effect of troubled assets, such as unpaid 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 kinds of assets may eventually have to use capital to absorb losses, decreasing its equity buffer. Many of those assets are also likely to be in non-accrual status and no longer earning money, resulting in depressed earnings and potentially more risk of a future failure.

On Bankrate's test of asset quality, Bank of Denton scored 40 out of a possible 40 points, beating 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, 1.29 percent of Bank of Denton'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 troubled 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 troubled assets. Unfortunately, the FDIC did not provide information on Bank of Denton's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its long-term survivability. Earnings may be retained by the bank, expanding its capital cushion, or be used to deal with problematic loans, likely making the bank more resilient in tough times. Conversely, losses lessen a bank's ability to do those things.

Bank of Denton scored 8 out of a possible 30 on Bankrate's test of earnings, failing to reach 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 total equity. Bank of Denton's most recent annualized quarterly return on equity was 3.31 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $108,000 on total equity of $3.3 million. The bank experienced an annualized return on average assets, or ROA, of 0.61 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.