Kensington Bank: Overview of the bank

Founded in 1898, Kensington Bank is a relatively small bank. The company’s main office is located in the city of Kensington in the state of Minnesota. There are a total of 265 banks operating in the state of Minnesota and combined these banks have $106,775 million of assets. Kensington Bank has been operating for 124 years. The bank first got insured by the Federal Deposit Insurance Corporation in the year 1934 which is effectively the first year it was possible to get insured by the agency, which itself was founded in the prior year. In addition, the FDIC is the primary federal regulator for the bank and is focused on supervising and examining the bank for operational safety and soundness. Mainly because of its relative size, geographic reach and presence, the bank is considered to be a community bank, instead of a national bank. Based on our estimates, we believe its asset base of $334 million ranks it in the 50th percentile of banks in the United States. Kensington Bank is primarily a domestic bank and does not at the current time have operations outside of the United States. Domestically, the bank currently has 9 offices. Finally, the bank currently has a total employee base of 67 people.

Discussion of the key components of the Bank’s Balance Sheet

Some of the key components of the bank’s balance sheet are total assets of $334 million, total loans extended to customers of $210 million and customer deposits of $289 million. Domestic deposits currently represent (in terms of total size), 86% of the bank’s total assets, and 100% of the bank’s total deposits outstanding. Within these deposits 86% are insured based on the latest available information. Outstanding loans to the bank’s customers makes up 63% of the bank’s assets. Within this, real estate loans represented 65% of the total and 100% of real estate loans were domestic. Kensington Bank has $31 million of outstanding 1-4 family residential loans (mortgages), which in total represents 15% of its loans outstanding. Loans to individuals and loans to commercial and industrial interests represent 5% and 18% of loans outstanding, respectively. Loans to farmland and farms represents 28% of loans outstanding.

Contact Information For Kensington Bank

  • Main Office Address: 11 N. Central Ave., Kensington, MN 56343
  • Website: www.kensington.bank
  • Total Number of Branches: 9
  • Total Number of International Branches: None
  • Number of Employees: 67
  • FDIC Certificate Number: 1409
  • FDIC Community Bank: Yes
  • FDIC Field Office: Fargo
  • Independent or Subsidiary Bank: Independent
  • Federal Reserve ID Number: 58757
  • Bank Charter Class: NM
  • Primary Regulator: FDIC

Financial Overview

kensington bank-financial-metrics-dec-21 The bank had total assets of $334 million based on the latest available information. Its total assets have increased substantially over the past year, with an increase of 7.5%. Moving to the other side of the balance sheet, we see net loans of $210 million which compares with $225 million in the prior year. Therefore its clear that over the past year the bank’s net loans outstanding has reported a decrease of 6.9%. Taking a closer look at the bank’s loan portfolio, we see that residential mortgages comprise 15% of the bank’s loan book. The bank has $31 million of residential mortgages outstanding, which compares with $30 million in the prior year. This implies an increase of 4.8% over the past year. In addition, the bank provides loans to commercial and industrial businesses, which represents 17.6% of its total lending and stood at $37 million based on the latest available information. The bank also provides loans for farm-related activities, which currently amounts to 27.7% of its total loan portfolio. Finally, the bank also engages in the provision of auto loans. These are loans provided to customers to help finance vehicle purchases. Auto loans represent 0.2% of the bank’s total lending. Bank Liquidity and Funding Liquidity and funding are two important considerations when evaluating a bank. It gives us a sense of how a bank finances its activities and can help both depositors and customers better understand a banks financial positioning. Customer deposits is usually one of the cheapest ways to finance a bank. This is especially the case for accounts that don’t pay interest, such as checking accounts. Kensington Bank has total customer deposits of $289 million. Looking over the past year, its deposit base has increased substantially with a growth rate of 9.4%. In addition, the bank has a loan to deposit ratio of 73%, which is below the average of banks in the United States. The average in the United States is approximately 82% and as a reminder, a lower ratio indicates greater liquidity. Effectively all of the bank’s deposit base is funded by domestic sources.

Bank Performance and Capital Metrics

kensington bank-performance-metrics-dec-21 The above chart provides a brief summary of some of the key performance metrics for Kensington Bank. Next to these metrics are the equivalent for the average U.S. bank. Starting with its return on assets, over the past year it has improved. Importantly, on this metric we can also see that the bank is below the average bank. Return on assets tells us how productive a bank is being with its asset base. Moving on to the bank’s return on equity, which tells us how much of a return the bank has generated for its owners, over the past year it has improved. In addition, we can also see that the bank is below the average bank on this metric. The bank’s total leverage ratio has been relatively stable over the past year and is currently below the national average. Last but certainly not least is the tier 1 capital ratio. This is an important measure of the financial strength of a bank and its balance sheet. Kensington Bank’s tier 1 capital ratio has been relatively stable over the past year, and is below the average U.S. bank.

Final Thoughts: Kensington Bank

Our final rating for Kensington Bank, after assessing the bank on several important metrics, is 2.4 out of 5.0, which is average. There are many factors that go into the calculation of our rating and almost all banks will have both positive and negative contributors. As an example, Kensington Bank scores well on its cost of funds, which is above the national average. However when we consider the bank’s return on assets, the bank does not have a good score mainly because it is below the national average which impacts its rating. As a reminder, our rating is based on our proprietary scoring system which uses data from an in-depth nationwide bank study we performed. None of the work presented is intended to be investment advice or advice of any sort and is presented purely for informational purposes.