Safe and Sound

Capitol Federal Savings Bank

Topeka, KS
5
Star Rating
Started in 1893, Capitol Federal Savings Bank is an FDIC-insured bank headquartered in Topeka, KS. Regulatory filings show the bank having equity of $1.22 billion on $9.01 billion in assets, as of December 31, 2017.

U.S. bank customers have $5.40 billion on deposit at 47 offices in multiple states run by 655 full-time employees. With that footprint, the bank holds loans and leases worth $7.19 billion, including real estate loans of $7.20 billion.

Overall, Bankrate believes that, as of December 31, 2017, Capitol Federal Savings Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's an analysis of how the bank did on the three key criteria Bankrate used to score American banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital is a valuable measurement of a bank's financial resilience. It works as a cushion against losses and affords protection for depositors during times of economic instability for the bank. When it comes to safety and soundness, more capital is preferred.

Capitol Federal Savings Bank beat out the national average of 13.13 points on our test to measure the adequacy of a bank's capital, scoring 18 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Capitol Federal Savings Bank's Tier 1 capital ratio was 27.33 percent, higher than the 6 percent level regulators consider adequate, and exceeding the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to economic headwinds.

Overall, Capitol Federal Savings Bank held equity amounting to 13.51 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 reserves set aside to cover loan losses, as well as overall capitalization, could be affected by problem assets, such as unpaid loans.

Having lots of these kinds of assets means a bank could eventually have to use capital to cover losses, cutting down on its cushion 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 lower earnings and potentially more risk of a failure in the future.

Capitol Federal Savings Bank 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, 0.22 percent of Capitol Federal Savings Bank'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 . Comparing how large that reserve is to the total amount of at-risk loans can be a helpful indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Capitol Federal Savings Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance affects its safety and soundness. A bank can retain its earnings, giving a boost to its capital cushion, or use them to deal with problematic loans, likely making the bank more resilient in tough times. Losses, on the other hand, take away from a bank's ability to do those things.

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

Return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity, is one key measure of a bank's earnings. The most recent annualized quarterly return on equity for Capitol Federal Savings Bank was 7.81 percent, below the national average of 8.10 percent.

The bank reported net income of $95.4 million on total equity of $1.22 billion for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 1.04 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.