Safe and Sound

The Denison State Bank

Holton, KS
5
Star Rating
Founded in 1901, The Denison State Bank is an FDIC-insured bank based in Holton, KS. The bank has equity of $43.2 million on $327.3 million in assets, according to December 31, 2017, regulatory filings.

U.S. bank customers have $259.1 million on deposit at 5 offices in KS run by 68 full-time employees. With that footprint, the bank currently holds loans and leases worth $198.7 million, including $128.9 million worth of real estate loans.

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

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THE INSTITUTION'S SCORE

Capital Score

Capital is a useful measurement of a bank's financial resilience. It acts as a cushion against losses and provides protection for depositors when a bank is struggling financially. From a safety and soundness perspective, the higher the capital, the better.

On our test to measure the adequacy of a bank's capital, The Denison State Bank achieved a score of 18 out of a possible 30 points, beating out the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. The Denison State Bank's Tier 1 capital ratio was 18.60 percent, higher than 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 weather financial downturns.

Overall, The Denison State Bank held equity amounting to 13.19 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to estimate the effect of problem assets, such as unpaid loans, on the bank's capitalization and allocated loan loss reserves.

A bank with extensive holdings of these kinds of assets may eventually have to use capital to cover losses, diminishing 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, reducing earnings and elevating the chances of a failure in the future.

The Denison State Bank did better than the national average of 37.49 on Bankrate's asset quality test, racking up 40 out of a possible 40 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, 0.62 percent of The Denison State Bank's loans were noncurrent, meaning 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 handle problem assets known as an "allowance for loan and lease losses." Comparing the reserve's size to the total amount of problem loans can be a handy indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on The Denison State Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance has an effect on its long-term survivability. Earnings can be retained by the bank, giving a boost to its capital buffer, or be used to deal with problematic loans, potentially making the bank better prepared to withstand economic shocks. Banks that are losing money, however, have less ability to do those things.

On Bankrate's test of earnings, The Denison State Bank scored 22 out of a possible 30, better than the national average of 15.12.

Return on equity, calculated by dividing net income (essentially, profit) by the total amount of equity, is one important measure of a bank's earnings. The Denison State Bank's most recent annualized quarterly return on equity was 13.56 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $5.7 million on total equity of $43.2 million. The bank had an annualized return on average assets, or ROA, of 1.78 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.