Safe and Sound

Ashton State Bank

Ashton, IA
5
Star Rating
Ashton, IA-based Ashton State Bank is an FDIC-insured bank started in 1884. As of June 30, 2017, the bank had equity of $6.1 million on $48,821,000 in assets.

With 7 full-time employees, the bank holds loans and leases worth $30.8 million, including real estate loans of $18.8 million. U.S. bank customers currently have $35.6 million in deposits with the bank.

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

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a cushion against losses and as protection for accountholders when a bank is experiencing economic instability. It follows then that a bank's level of capital is a crucial measurement of an institution's financial fortitude. When it comes to safety and soundness, more capital is preferred.
On our test to measure capital adequacy, Ashton State Bank achieved a score of 16 out of a possible 30 points, beating out the national average of 13.38.

A bank's Tier 1 capital ratio is a commonly used measure of this buffer. Ashton State Bank's Tier 1 capital ratio was 15.39 percent, exceeding the 6 percent level regulators consider adequate, but less than the national average of 25.16 percent. A higher capital ratio means the bank will be better able to weather financial downturns.

Overall, Ashton State Bank held equity amounting to 12.55 percent of its assets, which exceeded the national average of 12.10 percent.

Asset Quality Score

This test's purpose is to estimate how the bank's loan loss reserves and overall capitalization could be affected by problem assets, such as unpaid loans.

A bank with lots of these kinds of assets may eventually have to use capital to cover losses, decreasing its cushion of equity. Many of those assets are also likely to be in non-accrual status and no longer earning money, resulting in lower earnings and potentially more risk of a failure in the future.

On Bankrate's asset quality test, Ashton State Bank scored 40 out of a possible 40 points, exceeding the national average of 37.62 points.

A helpful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of June 30, 2017, 0.05 percent of Ashton State Bank's loans were noncurrent -- in other words, they were more than 90 days past due or were in non-accrual status. That's below the national average of 1.04 percent.

Banks maintain a reserve to handle problem assets known as an "allowance for loan and lease losses." Comparing the that reserve's size to the total amount of problem loans can be a handy indicator when evaluating a bank's ability to manage troubled assets. Ashton State Bank's loan loss allowance was 2,185.71 percent of its total noncurrent loans, above the national average. All else being equal, a higher ratio of loan loss allowance to noncurrent loans is better.

Earnings score

A bank's ability to earn money affects its safety and soundness. A bank can retain its earnings, giving a boost to its capital cushion, or use them to deal with problematic loans, likely making the bank better able to withstand economic trouble. Losses, on the other hand, take away from a bank's ability to do those things.

Ashton State Bank did above-average on Bankrate's test of earnings, achieving a score of 20 out of a possible 30.

One key way to measure a bank's earnings is return on equity, or net income (essentially profit) divided by the total amount of equity. Ashton State Bank's most recent annualized quarterly return on equity was 10.93 percent, above the national average of 9.28 percent.

For the twelve months ended June 30, 2017, the bank earned net income of $327,000 on total equity of $6.1 million. The bank had an annualized return on average assets, or ROA, of 1.32 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above 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.