Safe and Sound

Kress National Bank

Kress, TX
5
Star Rating
Kress National Bank is a Kress, TX-based, FDIC-insured bank dating back to 1963. Regulatory filings show the bank having equity of $4.7 million on $42.4 million in assets, as of December 31, 2017.

With 6 full-time employees, the bank currently holds loans and leases worth $18.5 million, including real estate loans of $2.5 million. U.S. bank customers currently have $37.6 million in deposits with the bank.

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

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a buffer against losses and affords protection for account holders during periods of financial instability for the bank. Therefore, a bank's level of capital is an essential measurement of a bank's financial resilience. When looking at safety and soundness, the more capital, the better.

On our test to measure the adequacy of a bank's capital, Kress National Bank racked up 14 out of a possible 30 points, beating out the national average of 13.13.

One widely followed measure of this buffer is a bank's Tier 1 capital ratio. Kress National Bank's Tier 1 capital ratio was 20.74 percent, exceeding the 6 percent level regulators consider adequate, but under 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, Kress National Bank held equity amounting to 11.11 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to estimate the impact of troubled assets, such as past-due mortgages, on the bank's loan loss reserves and overall capitalization.

A bank with lots of these kinds of assets could eventually be required to use capital to cover losses, decreasing its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning money, resulting in reduced earnings and potentially more risk of a future failure.

Kress National Bank scored 40 out of a possible 40 points on Bankrate's test of asset quality, exceeding the national average of 37.49.

A helpful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.04 percent of Kress National 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 troubled assets . The size of that reserve can be a helpful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of at-risk loans. Kress National Bank's loan loss allowance was 4,600.00 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

A bank's ability to earn money affects its long-term survivability. Earnings can be retained by the bank, expanding its capital buffer, or be used to deal with problematic loans, potentially making the bank better prepared to withstand economic trouble. Conversely, losses reduce a bank's ability to do those things.

On Bankrate's test of earnings, Kress National Bank scored 18 out of a possible 30, exceeding the national average of 15.12.

One important measure of a bank's earnings is return on equity, or net income (profit, essentially) divided by the total amount of equity. The most recent annualized quarterly return on equity for Kress National Bank was 9.75 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $452,000 on total equity of $4.7 million. The bank reported an annualized return on average assets, or ROA, of 1.11 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.