Safe and Sound

The Karnes County National Bank of Karnes City

Karnes City, TX
2
Star Rating
The Karnes County National Bank of Karnes City is an FDIC-insured bank founded in 1900 and currently based in Karnes City, TX. As of December 31, 2017, the bank held equity of $33.2 million on $375.2 million in assets.

With 29 full-time employees, the bank holds loans and leases worth $67.8 million, including real estate loans of $54.7 million. U.S. bank customers currently have $340.8 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, The Karnes County National Bank of Karnes City exhibited a below-average condition, earning 2 out of 5 stars for safety and soundness. Keep reading for a breakdown of how the bank did on the three major criteria Bankrate used to grade American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital is a key measurement of a bank's financial resilience. It works as a buffer against losses and provides protection for depositors when a bank is struggling financially. When it comes to safety and soundness, the more capital, the better.

On our test to measure capital adequacy, The Karnes County National Bank of Karnes City received a score of 8 out of a possible 30 points, coming in below the national average of 13.13.

One commonly used measure of this buffer is a bank's Tier 1 capital ratio. The Karnes County National Bank of Karnes City's Tier 1 capital ratio was 28.32 percent, higher than the 6 percent level regulators consider adequate, and above the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather economic headwinds.

Overall, The Karnes County National Bank of Karnes City held equity amounting to 8.84 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test is intended to try to understand how the bank's loan loss reserves and overall capitalization could be affected by problem assets, such as unpaid mortgages.

A bank with a large number of these kinds of assets could eventually have to use capital to absorb losses, cutting down on its equity cushion. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning money, pushing down earnings and increasing the risk of a failure in the future.

The Karnes County National Bank of Karnes City scored 28 out of a possible 40 points on Bankrate's asset quality test, coming in below the national average of 37.49.

The percentage of problem assets a bank holds compared to its total assets is a handy indicator of asset quality.As of December 31, 2017, 8.99 percent of The Karnes County National Bank of Karnes City's loans were noncurrent, meaning 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 keep a reserve to handle problem assets known as an "allowance for loan and lease losses." 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 Karnes County National Bank of Karnes City's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its long-term survivability. Earnings may be retained by the bank, increasing its capital buffer, or be used to deal with problematic loans, likely making the bank more resilient in tough times. Losses, on the other hand, reduce a bank's ability to do those things.

The Karnes County National Bank of Karnes City underperformed the average on Bankrate's earnings test, achieving a score of 6 out of a possible 30.

One widely used measure of a bank's earnings is return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity. The Karnes County National Bank of Karnes City's most recent annualized quarterly return on equity was 2.51 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $845,000 on total equity of $33.2 million. The bank reported an annualized return on average assets, or ROA, of 0.24 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.