Safe and Sound

Bank of the Prairie

Olathe, KS
4
Star Rating
Olathe, KS-based Bank of the Prairie is an FDIC-insured bank founded in 1914. As of December 31, 2017, the bank held equity of $12.1 million on $140.2 million in assets.

With 28 full-time employees in 2 offices in KS, the bank has amassed loans and leases worth $98.4 million, including real estate loans of $76.3 million. U.S. bank customers currently have $108.3 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Bank of the Prairie exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a breakdown of how the bank fared on the three important criteria Bankrate used to grade American banks.

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 when a bank is struggling financially. It follows then that when it comes to measuring an a bank's financial fortitude, capital is important. When looking at safety and soundness, the more capital, the better.

Bank of the Prairie finished below the national average of 13.13 on our test to measure capital adequacy, achieving a score of 8 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Bank of the Prairie's Tier 1 capital ratio was 11.01 percent, above the 6 percent level regulators consider adequate, but lower than the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to economic difficulties.

Overall, Bank of the Prairie held equity amounting to 8.66 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to determine the effect of problem assets, such as past-due loans, on the bank's loan loss reserves and overall capitalization.

A bank with large numbers of these kinds of assets could eventually have to use capital to cover losses, decreasing its buffer of equity. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, resulting in depressed earnings and potentially more risk of a future failure.

Bank of the Prairie scored 40 out of a possible 40 points on Bankrate's asset quality test, better than the national average of 37.49.

A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.27 percent of Bank of the Prairie'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 troubled assets . The size of that reserve can be a widely used indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on Bank of the Prairie's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its safety and soundness. A bank can retain its earnings, increasing its capital cushion, or use them to deal with problematic loans, likely making the bank more resilient in tough times. However, banks that are losing money are less able to do those things.

On Bankrate's earnings test, Bank of the Prairie scored 16 out of a possible 30, beating the national average of 15.12.

One key measure of a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by the total amount of equity. The most recent annualized quarterly return on equity for Bank of the Prairie was 7.76 percent, below the national average of 8.10 percent.

The bank earned net income of $900,000 on total equity of $12.1 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 0.72 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.