Safe and Sound

The First State Bank, Kiowa, Kansas

Kiowa, KS
3
Star Rating
Kiowa, KS-based The First State Bank, Kiowa, Kansas is an FDIC-insured bank started in 1935. Regulatory filings show the bank having equity of $10.0 million on $64.2 million in assets, as of December 31, 2017.

With 10 full-time employees, the bank currently holds loans and leases worth $44.4 million, including real estate loans of $17.5 million. U.S. bank customers currently have $52.4 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, The First State Bank, Kiowa, Kansas exhibited a generally satisfactory condition, earning 3 out of 5 stars for safety and soundness. Keep reading for an analysis of how the bank fared on the three important criteria Bankrate used to grade American banks.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a buffer against losses and as protection for account holders when a bank is struggling financially. Therefore, a bank's level of capital is a valuable measurement of a bank's financial resilience. When looking at safety and soundness, more capital is preferred.

On our test to measure capital adequacy, The First State Bank, Kiowa, Kansas achieved a score of 22 out of a possible 30 points, beating out the national average of 13.13.

A bank's Tier 1 capital ratio is an essential measure of this buffer. The First State Bank, Kiowa, Kansas's Tier 1 capital ratio was 20.45 percent, above 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 stand up to economic downturns.

Overall, The First State Bank, Kiowa, Kansas held equity amounting to 15.59 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test's purpose is 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 could eventually force a bank to use capital to absorb losses, reducing its equity cushion. Many of those assets are also likely to be in non-accrual status and no longer earning money, resulting in diminished earnings and potentially more risk of a failure in the future.

The First State Bank, Kiowa, Kansas scored 24 out of a possible 40 points on Bankrate's asset quality test, lower than the national average of 37.49.

The percentage of problem assets a bank holds compared to its total assets is a useful indicator of asset quality.As of December 31, 2017, 6.94 percent of The First State Bank, Kiowa, Kansas's loans were noncurrent -- in other words, 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." How large that reserve is can be a useful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on The First State Bank, Kiowa, Kansas's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money affects its long-term survivability. A bank can retain its earnings, boosting its capital cushion, or use them to deal with problematic loans, potentially making the bank more resilient in tough times. Banks that are losing money, however, have less ability to do those things.

The First State Bank, Kiowa, Kansas fell behind the national average on Bankrate's earnings test, achieving a score of 4 out of a possible 30.

Return on equity, calculated by dividing net income (essentially, profit) by the total amount of equity, is one key measure of a bank's earnings. The First State Bank, Kiowa, Kansas's most recent annualized quarterly return on equity was 1.22 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $124,000 on total equity of $10.0 million. The bank reported an annualized return on average assets, or ROA, of 0.19 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.