Safe and Sound

Kitsap Bank

Port Orchard, WA
5
Star Rating
Port Orchard, WA-based Kitsap Bank is an FDIC-insured bank founded in 1908. As of December 31, 2017, the bank held equity of $126.6 million on assets of $1.14 billion.

U.S. bank customers have $995.3 million on deposit at 22 offices in WA run by 287 full-time employees. With that footprint, the bank has amassed loans and leases worth $648.7 million, including real estate loans of $582.7 million.

Overall, Bankrate believes that, as of December 31, 2017, Kitsap Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a breakdown of how the bank fared on the three major criteria Bankrate used to grade U.S. banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial stability, capital is important. It works as a buffer against losses and as protection for depositors when a bank is experiencing economic instability. From a safety and soundness perspective, the more capital, the better.

On our test to measure the adequacy of a bank's capital, Kitsap Bank received a score of 10 out of a possible 30 points, coming in below the national average of 13.13.

One important measure of this buffer is a bank's Tier 1 capital ratio. Kitsap Bank's Tier 1 capital ratio was 13.81 percent, exceeding the 6 percent level considered adequate by regulators, but less than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather economic downturns.

Overall, Kitsap Bank held equity amounting to 11.13 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

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

Having a large number of these kinds of assets may eventually require a bank to use capital to absorb losses, shrinking its cushion of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning interest for the bank, decreasing earnings and elevating the chances of a failure in the future.

Kitsap Bank scored above the national average of 37.49 on Bankrate's asset quality test, racking up 40 out of a possible 40 points .

The percentage of problem assets a bank holds compared to its total assets is a widely used indicator of asset quality.As of December 31, 2017, 0.03 percent of Kitsap 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 to deal with troubled assets known as an "allowance for loan and lease losses." That reserve's size can be a handy indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problematic loans. Kitsap Bank's loan loss allowance was 3,812.11 percent of its total noncurrent loans, exceeding the national average. All else being equal, the higher the ratio of loan loss allowance to noncurrent loans, the better.

Earnings score

How profitable a bank is affects its safety and soundness. A bank can retain its earnings, expanding its capital cushion, or use them to deal with problematic loans, potentially making the bank more resilient in tough times. Obviously, banks that are losing money are less able to do those things.

Kitsap Bank scored 20 out of a possible 30 on Bankrate's earnings test, beating the national average of 15.12.

Return on equity, calculated by dividing net income (profit, essentially) by total equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for Kitsap Bank was 11.01 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $13.4 million on total equity of $126.6 million. The bank experienced an annualized return on average assets, or ROA, of 1.17 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.