Safe and Sound

Kaw Valley Bank

4
Star Rating
Kaw Valley Bank is an FDIC-insured bank started in 1870 and currently based in Topeka, KS. The bank holds equity of $30.6 million on $324.8 million in assets, according to December 31, 2017, regulatory filings.

U.S. bank customers have $288.4 million on deposit at 10 offices in KS run by 82 full-time employees. With that footprint, the bank currently holds loans and leases worth $258.8 million, $192.0 million of which are for real estate.

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

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THE INSTITUTION'S SCORE

Capital Score

Capital is a crucial measurement of an institution's financial strength. It works as a buffer against losses and affords protection for depositors when a bank is struggling financially. From a safety and soundness perspective, the more capital, the better.

Kaw Valley Bank received a score of 10 out of a possible 30 points on our test to measure the adequacy of a bank's capital, lower than the national average of 13.13.

One essential measure of this buffer is a bank's Tier 1 capital ratio. Kaw Valley Bank's Tier 1 capital ratio was 10.69 percent, above the 6 percent level regulators consider adequate, but less than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to economic difficulties.

Overall, Kaw Valley Bank held equity amounting to 9.42 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test is intended to try to understand how the bank's capitalization and allocated loan loss reserves could be affected by problem assets, such as past-due mortgages.

A bank with large numbers of these types of assets could eventually be forced to use capital to cover losses, cutting down on its equity buffer. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, resulting in depressed earnings and potentially more risk of a future failure.

On Bankrate's test of asset quality, Kaw Valley Bank scored 40 out of a possible 40 points, above 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, 0.46 percent of Kaw Valley 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 maintain a reserve known as an "allowance for loan and lease losses" to deal with problem assets . That reserve's size can be a helpful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on Kaw Valley Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability affects its safety and soundness. A bank can retain its earnings, expanding its capital buffer, or put them to work addressing problematic loans, potentially making the bank more resilient in times of trouble. Losses, on the other hand, lessen a bank's ability to do those things.

On Bankrate's test of earnings, Kaw Valley Bank scored 6 out of a possible 30, coming in below the national average of 15.12.

One key measure of a bank's earnings is return on equity, or net income (profit, basically) divided by the total amount of equity. The most recent annualized quarterly return on equity for Kaw Valley Bank was 1.91 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $692,000 on total equity of $30.6 million. The bank had an annualized return on average assets, or ROA, of 0.20 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.