Safe and Sound

Ashton State Bank

Ashton, NE
3
Star Rating
Started in 1908, Ashton State Bank is an FDIC-insured bank based in Ashton, NE. Regulatory filings show the bank having equity of $2.3 million on assets of $21.4 million, as of June 30, 2017.

With 6 full-time employees, the bank holds loans and leases worth $15.7 million, including real estate loans of $6.4 million. U.S. bank customers currently have $18.9 million in deposits with the bank.

Overall, Bankrate believes that, as of June 30, 2017, Ashton State Bank exhibited a generally satisfactory condition, earning 3 out of 5 stars for safety and soundness. Keep reading for an analysis of how the bank did on the three important criteria Bankrate used to evaluate U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a bulwark against losses and provides protection for accountholders during periods of financial instability for the bank. It follows then that when it comes to measuring an an institution's financial resilience, capital is essential. From a safety and soundness perspective, the more capital, the better.
Ashton State Bank fell short of the national average of 13.38 on our test to measure capital adequacy, achieving a score of 12 out of a possible 30 points.

One widely used measure of this buffer is a bank's Tier 1 capital ratio. Ashton State Bank's Tier 1 capital ratio was 12.62 percent, above the 6 percent level considered adequate by regulators, but less than the national average of 25.16 percent. The higher the capital ratio, the better the bank will be able to stand up to financial headwinds.

Overall, Ashton State Bank held equity amounting to 10.66 percent of its assets, which was lower than the national average of 12.10 percent.

Asset Quality Score

Bankrate uses this test to determine the effect of troubled assets, such as unpaid loans, on the bank's loan loss reserves and overall capitalization.

Having a large number of these kinds of assets means a bank may eventually have to use capital to absorb losses, cutting down on its buffer of equity. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning interest for the bank, reducing earnings and increasing the chances of a failure in the future.

Ashton State Bank scored below the national average of 37.62 on Bankrate's asset quality test, racking up 28 out of a possible 40 points .

A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of June 30, 2017, 4.07 percent of Ashton State Bank's loans were noncurrent, meaning they were more than 90 days past due or were in non-accrual status. That's above the national average of 1.04 percent.

Banks keep a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . Comparing the the size of that reserve to the total amount of problematic loans can be a useful indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Ashton State Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its long-term survivability. A bank can retain its earnings, expanding its capital buffer, or use them to deal with problematic loans, likely making the bank better prepared to withstand economic trouble. Losses, on the other hand, reduce a bank's ability to do those things.

Ashton State Bank scored 12 out of a possible 30 on Bankrate's test of earnings, lower than the national average of 16.52.

Return on equity, calculated by dividing net income (essentially, profit) by the total amount of equity, is one important way to measure a bank's earnings. Ashton State Bank's most recent annualized quarterly return on equity was 6.07 percent, below the national average of 9.28 percent.

The bank recorded net income of $68,000 on total equity of $2.3 million for the twelve months ended June 30, 2017. The bank reported an annualized return on average assets, or ROA, of 0.63 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below the average for U.S. banks of 1.14 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.