KBRA Financial Intelligence

Q2 2023 Bank KFI Scores Trend Lower

KFI Bank Scores were down in Q2 2023 on declining asset quality and increased funding costs, according to the latest analysis from KBRA Financial Intelligence (KFI). The scores fell slightly, with more banks ranked B than B+ compared with the previous quarter. Over the last year, KFI Scores have declined as the Federal Reserve’s higher interest rates curb lender profitability.

KFI’s quantitative methodology measures default risk by analyzing asset quality, capital adequacy, and other key performance metrics. The proprietary model assesses more than 10,000 banks and credit unions on an A through E scale.

One of the biggest Q2 KFI Score declines was Russell, Kentucky-based community bank First & Peoples Bank and Trust Company. The lender, with $228 million in assets, had its KFI Score lowered to E from B+ in part because of a significant increase in nonperforming assets, plus a drop in net interest margin and tangible common equity.

Banks that saw KFI Score increases in the period include Denver, Colorado-based Native American Bank. The $223 million asset lender increased its return on average assets, boosted profitability, and its Tier 1 leverage ratio.