Safe and Sound

Kentland Bank

Kentland, IN
5
Star Rating
Kentland Bank is an FDIC-insured bank founded in 1932 and currently headquartered in Kentland, IN. The bank has equity of $40.7 million on assets of $293.3 million, according to December 31, 2017, regulatory filings.

U.S. bank customers have $244.0 million on deposit at 5 offices in IN run by 62 full-time employees. With that footprint, the bank holds loans and leases worth $171.2 million, including real estate loans of $114.6 million.

Overall, Bankrate believes that, as of December 31, 2017, Kentland Bank 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 key criteria Bankrate used to grade American banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

Capital is an important measurement of a bank's financial strength. It acts as a cushion against losses and provides protection for accountholders when a bank is struggling financially. When it comes to safety and soundness, more capital is preferred.

Kentland Bank racked up 18 out of a possible 30 points on our test to measure the adequacy of a bank's capital, exceeding the national average of 13.13.

One commonly used measure of this buffer is a bank's Tier 1 capital ratio. Kentland Bank's Tier 1 capital ratio was 18.21 percent, above the 6 percent level regulators consider adequate, but less than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to financial downturns.

Overall, Kentland Bank held equity amounting to 13.86 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 past-due loans, on the bank's loan loss reserves and overall capitalization.

Having large numbers of these kinds of assets could eventually force a bank to use capital to cover losses, reducing its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and no longer earning interest for the bank, diminishing earnings and elevating the risk of a failure in the future.

On Bankrate's asset quality test, Kentland Bank scored 40 out of a possible 40 points, above the national average of 37.49 points.

A handy indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.57 percent of Kentland 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 . Comparing the size of that reserve to the total amount of problem loans can be a widely used indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Kentland Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its safety and soundness. A bank can retain its earnings, boosting its capital cushion, or use them to address problematic loans, potentially making the bank better prepared to withstand economic shocks. Conversely, losses reduce a bank's ability to do those things.

Kentland Bank scored 18 out of a possible 30 on Bankrate's earnings test, better than the national average of 15.12.

Return on equity, calculated by dividing net income (essentially, profit) by total equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for Kentland Bank was 8.77 percent, above the national average of 8.10 percent.

The bank earned net income of $3.7 million on total equity of $40.7 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 1.22 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.