The purpose of the study was to examine the effects of loan default on the financial performance of Kaaseman Rural Bank for the period 2009 to 2018. The study used the explanatory design as it sought to explain the extent to which loan default impact on the profitability of the bank. The study utilized only the secondary data from an accumulated published annual financial statements and reports of the Kaaseman Rural bank for the study period. Quantitative analysis with emphasis on descriptive and inferential statistics was used to analyse the data. In the analysis, correlation and multiple linear regression model were used to test the significance of the influence of the independent variable on the dependent variable. Findings on the composition of loan default at the bank showed that the Sub-standard Asset (SSA) constituted 21.0%, the Doubtful Asset (DA) also constituted 27.8% while the Asset Loss (AL) constituted 52.2%. The findings regarding the trend of Asset Loss component of the loan default of the bank for the period 2009 to 2018 showed that since 2011, there has been a downward trend of the Asset loss to 2014 until it went up in 2015 and 2016 and then declined from 2017 to 2018. The regression analysis showed significant relationship between loan default and financial performance as suggested by the ANOVA results (p<0.005). Specifically, the summary of individual independent variables impacting or influencing the financial performance (ROE and ROA) showed that there is no significant relationship between Sub-standard Asset and the banks performance at (p<0.005).