Kahoka State Bank

THE INSTITUTION'S SCORE

Capital Score

Capital is an essential measurement of a bank's financial resilience. It acts as a cushion against losses and affords protection for accountholders when a bank is experiencing economic trouble. From a safety and soundness perspective, more capital is better.

Kahoka State Bank received a score of 10 out of a possible 30 points on our test to measure the adequacy of a bank's capital, below the national average of 13.13.

A bank's Tier 1 capital ratio is an important measure of this buffer. Kahoka State Bank's Tier 1 capital ratio was 18.08 percent, exceeding the 6 percent level regulators consider adequate, but below the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to financial difficulties.

Overall, Kahoka State Bank held equity amounting to 9.68 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

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

Having lots of these types of assets means a bank may have to use capital to absorb losses, shrinking its cushion of equity. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, resulting in reduced earnings and potentially more risk of a future failure.

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

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, 0.03 percent of Kahoka State Bank's loans were noncurrent -- in other words, 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 . The size of that reserve can be a handy indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problematic loans. Kahoka State Bank's loan loss allowance was 7,171.43 percent of its total noncurrent loans, higher than the national average. All things being equal, a higher ratio of loan loss allowance to noncurrent loans is better.

Earnings score

How profitable a bank is has an effect on its long-term survivability. A bank can retain its earnings, giving a boost to its capital buffer, or put them to work addressing problematic loans, potentially making the bank better prepared to withstand financial trouble. Conversely, losses reduce a bank's ability to do those things.

Kahoka State Bank scored 6 out of a possible 30 on Bankrate's earnings test, coming in below 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. The most recent annualized quarterly return on equity for Kahoka State Bank was 2.58 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $125,000 on total equity of $4.8 million. The bank experienced an annualized return on average assets, or ROA, of 0.25 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below the average for U.S. banks of 1.00 percent.