Safe and Sound

The Howard State Bank, Howard, Kansas

Howard, KS
4
Star Rating
Howard, KS-based The Howard State Bank, Howard, Kansas is an FDIC-insured bank started in 1877. Regulatory filings show the bank having equity of $5.3 million on $55.4 million in assets, as of December 31, 2017.

Thanks to the efforts of 17 full-time employees in 4 offices in KS, the bank holds loans and leases worth $23.4 million, including $15.8 million worth of real estate loans. The bank currently holds $50.1 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, The Howard State Bank, Howard, Kansas exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a look at how the bank fared on the three important criteria Bankrate used to evaluate U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial resilience, capital is useful. It acts as a bulwark against losses and provides protection for accountholders during periods of financial trouble for the bank. When looking at safety and soundness, the more capital, the better.

On our test to measure capital adequacy, The Howard State Bank, Howard, Kansas received a score of 10 out of a possible 30 points, lower than the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. The Howard State Bank, Howard, Kansas's Tier 1 capital ratio was 20.08 percent, above the 6 percent level regulators consider adequate, but below the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather economic difficulties.

Overall, The Howard State Bank, Howard, Kansas held equity amounting to 9.53 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

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

A bank with lots of these kinds of assets could eventually have to use capital to cover losses, diminishing its cushion 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, diminishing earnings and increasing the chances of a failure in the future.

The Howard State Bank, Howard, Kansas scored 40 out of a possible 40 points on Bankrate's asset quality test, above the national average of 37.49.

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, 1.20 percent of The Howard State Bank, Howard, 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 known as an "allowance for loan and lease losses" to deal with problem assets . Comparing the size of that reserve to the total amount of problem loans can be a useful indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on The Howard State Bank, Howard, Kansas's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money has an effect on its safety and soundness. Earnings may be retained by the bank, boosting its capital buffer, or be used to address problematic loans, potentially making the bank better prepared to withstand financial shocks. Obviously, banks that are losing money are less able to do those things.

The Howard State Bank, Howard, Kansas received below-average marks on Bankrate's earnings test, achieving a score of 14 out of a possible 30.

One important way to measure a bank's earnings is return on equity, calculated by dividing net income (profit, basically) by total equity. The most recent annualized quarterly return on equity for The Howard State Bank, Howard, Kansas was 6.66 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $356,000 on total equity of $5.3 million. The bank reported an annualized return on average assets, or ROA, of 0.67 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.