Safe and Sound

Verus Bank

Derby, KS
5
Star Rating
Verus Bank is an FDIC-insured bank founded in 1974 and currently based in Derby, KS. The bank has equity of $12.0 million on assets of $137.7 million, according to December 31, 2017, regulatory filings.

With 41 full-time employees in 5 offices in KS, the bank holds loans and leases worth $89.3 million, including real estate loans of $70.7 million. U.S. bank customers currently have $116.8 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Verus Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for an analysis of how the bank fared on the three key criteria Bankrate used to score American banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

Capital acts as a buffer against losses and provides protection for account holders during times of financial trouble for the bank. It follows then that when it comes to measuring an a bank's financial strength, capital is key. When looking at safety and soundness, the higher the capital, the better.

Verus Bank scored below the national average of 13.13 on our test to measure capital adequacy, scoring 8 out of a possible 30 points.

One commonly used measure of this buffer is a bank's Tier 1 capital ratio. Verus Bank's Tier 1 capital ratio was 12.34 percent, above the 6 percent level considered adequate by regulators, but lower than the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to economic challenges.

Overall, Verus Bank held equity amounting to 8.72 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to try to understand 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 mortgages.

A bank with lots of these kinds of assets could eventually be required to use capital to cover losses, cutting down on its equity buffer. 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, resulting in depressed earnings and potentially more risk of a future failure.

Verus Bank did better than the national average of 37.49 on Bankrate's asset quality test, racking up 40 out of a possible 40 points .

A handy indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, none of Verus Bank's loans were noncurrent, meaning 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 maintain a reserve known as an "allowance for loan and lease losses" to deal with problem assets . How large that reserve is can be a widely used 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 Verus Bank'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, giving a boost to its capital cushion, or be used to deal with problematic loans, likely making the bank better prepared to withstand economic trouble. However, banks that are losing money have less ability to do those things.

Verus Bank scored 22 out of a possible 30 on Bankrate's earnings test, above the national average of 15.12.

One widely used measure of a bank's earnings is return on equity, or net income (essentially profit) divided by the total amount of equity. The most recent annualized quarterly return on equity for Verus Bank was 12.54 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $1.5 million on total equity of $12.0 million. The bank had an annualized return on average assets, or ROA, of 1.09 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.