Safe and Sound

The State Bank of Canton, Canton, Kansas

Canton, KS
5
Star Rating
Founded in 1895, The State Bank of Canton, Canton, Kansas is an FDIC-insured bank based in Canton, KS. Regulatory filings show the bank having equity of $5.8 million on $29.1 million in assets, as of December 31, 2017.

Thanks to the efforts of 5 full-time employees, the bank currently holds loans and leases worth $10.1 million, $2.5 million of which are for real estate. U.S. bank customers currently have $23.3 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, The State Bank of Canton, Canton, Kansas exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a look at how the bank did on the three major criteria Bankrate used to score American banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital is an essential measurement of a bank's financial strength. It works as a cushion against losses and provides protection for depositors during periods of economic instability for the bank. When looking at safety and soundness, more capital is better.

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

One essential measure of this buffer is a bank's Tier 1 capital ratio. The State Bank of Canton, Canton, Kansas's Tier 1 capital ratio was 41.71 percent, exceeding the 6 percent level considered adequate by regulators, and exceeding the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather financial downturns.

Overall, The State Bank of Canton, Canton, Kansas held equity amounting to 19.84 percent of its assets, which exceeded 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 past-due loans.

A bank with extensive holdings of these types of assets may eventually be forced to use capital to absorb losses, cutting down on its buffer of equity. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, decreasing earnings and increasing the risk of a failure in the future.

On Bankrate's asset quality test, The State Bank of Canton, Canton, Kansas scored 40 out of a possible 40 points, better than the national average of 37.49 points.

A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 2.24 percent of The State Bank of Canton, Canton, Kansas'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 known as an "allowance for loan and lease losses" to deal with troubled assets . Comparing the size of that reserve to the total amount of problematic 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 State Bank of Canton, Canton, Kansas's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its safety and soundness. Earnings may be retained by the bank, boosting its capital cushion, or be used to address problematic loans, potentially making the bank more resilient in times of trouble. Losses, on the other hand, lessen a bank's ability to do those things.

On Bankrate's earnings test, The State Bank of Canton, Canton, Kansas scored 6 out of a possible 30, lower than the national average of 15.12.

One important way to measure a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by total equity. The State Bank of Canton, Canton, Kansas's most recent annualized quarterly return on equity was 2.62 percent, below the national average of 8.10 percent.

The bank reported net income of $150,000 on total equity of $5.8 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.52 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.