Safe and Sound

Kerndt Brothers Savings Bank

Lansing, IA
4
Star Rating
Kerndt Brothers Savings Bank is a Lansing, IA-based, FDIC-insured bank dating back to 1908. As of December 31, 2017, the bank held equity of $30.6 million on $279.2 million in assets.

Thanks to the work of 69 full-time employees in 6 offices in IA, the bank has amassed loans and leases worth $201.0 million, including real estate loans of $118.9 million. The bank currently holds $217.7 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, Kerndt Brothers Savings Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's an analysis of how the bank did on the three important criteria Bankrate used to evaluate U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital is a key measurement of a bank's financial resilience. It acts as a buffer against losses and affords protection for accountholders when a bank is struggling financially. From a safety and soundness perspective, more capital is preferred.

On our test to measure capital adequacy, Kerndt Brothers Savings Bank received a score of 10 out of a possible 30 points, below the national average of 13.13.

A bank's Tier 1 capital ratio is an essential measure of this buffer. Kerndt Brothers Savings Bank's Tier 1 capital ratio was 11.34 percent, exceeding the 6 percent level considered adequate by regulators, but under the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather financial downturns.

Overall, Kerndt Brothers Savings Bank held equity amounting to 10.96 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to try to understand how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by problem assets, such as past-due mortgages.

Having a large number of these types of assets may eventually require a bank to use capital to absorb losses, cutting down on its buffer of equity. 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, decreasing earnings and increasing the risk of a future failure.

Kerndt Brothers Savings Bank fell below the national average of 37.49 on Bankrate's test of asset quality, racking up 36 out of a possible 40 points .

The percentage of problem assets a bank holds compared to its total assets is a handy indicator of asset quality.As of December 31, 2017, 1.37 percent of Kerndt Brothers Savings Bank's loans were noncurrent, meaning they were more than 90 days past due or were in non-accrual status. That's above the national average of 1.01 percent.

Banks maintain a reserve to handle problem assets known as an "allowance for loan and lease losses." 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 at-risk loans. Unfortunately, the FDIC did not provide information on Kerndt Brothers 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 buffer, or use them to address problematic loans, likely making the bank better able to withstand economic trouble. However, banks that are losing money are less able to do those things.

Kerndt Brothers Savings Bank outperformed the average on Bankrate's earnings test, achieving a score of 18 out of a possible 30.

Return on equity, calculated by dividing net income (profit, basically) by total equity, is one widely used measure of a bank's earnings. The most recent annualized quarterly return on equity for Kerndt Brothers Savings Bank was 8.18 percent, above the national average of 8.10 percent.

The bank earned net income of $2.5 million on total equity of $30.6 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.89 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.