Safe and Sound

The State Bank of Kansas

Fredonia, KS
5
Star Rating
Fredonia, KS-based The State Bank of Kansas is an FDIC-insured bank started in 1885. As of December 31, 2017, the bank had equity of $10.0 million on assets of $63.5 million.

With 8 full-time employees, the bank has amassed loans and leases worth $24.2 million, including real estate loans of $20.8 million. U.S. bank customers currently have $51.3 million in deposits with the bank.

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

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital is a key measurement of a bank's financial fortitude. It acts as a cushion against losses and provides protection for accountholders when a bank is experiencing economic instability. When it comes to safety and soundness, the higher the capital, the better.

The State Bank of Kansas exceeded the national average of 13.13 points on our test to measure capital adequacy, scoring 20 out of a possible 30 points.

One important measure of this buffer is a bank's Tier 1 capital ratio. The State Bank of Kansas's Tier 1 capital ratio was 34.42 percent, exceeding the 6 percent level considered adequate by regulators, and above the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to economic headwinds.

Overall, The State Bank of Kansas held equity amounting to 15.76 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 reserves set aside to cover loan losses, as well as overall capitalization, could be affected by problem assets, such as past-due loans.

Having lots of these kinds of assets could eventually force a bank to use capital to cover 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, resulting in diminished earnings and potentially more risk of a future failure.

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

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, none of The State Bank of Kansas's loans were noncurrent -- in other words, 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 known as an "allowance for loan and lease losses" to deal with troubled assets . The size of that reserve can be a handy 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 State Bank of 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 can be retained by the bank, boosting its capital buffer, or be used to address problematic loans, potentially making the bank more resilient in tough times. Losses, on the other hand, take away from a bank's ability to do those things.

On Bankrate's earnings test, The State Bank of Kansas scored 14 out of a possible 30, failing to reach the national average of 15.12.

Return on equity, calculated by dividing net income (profit, basically) by total equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for The State Bank of Kansas was 6.81 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $665,000 on total equity of $10.0 million. The bank experienced an annualized return on average assets, or ROA, of 1.05 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.