Safe and Sound

The Alden State Bank

Sterling, KS
4
Star Rating
Started in 1904, The Alden State Bank is an FDIC-insured bank based in Sterling, KS. As of June 30, 2017, the bank held equity of $2.3 million on assets of $19.5 million.

With 6 full-time employees, the bank currently holds loans and leases worth $10.3 million, including real estate loans of $4.9 million. U.S. bank customers currently have $17.1 million in deposits with the bank.

Overall, Bankrate believes that, as of June 30, 2017, The Alden State Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a breakdown of how the bank did on the three important criteria Bankrate used to score U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital is a useful measurement of an institution's financial strength. It acts as a buffer against losses and as protection for depositors when a bank is struggling financially. When it comes to safety and soundness, more capital is preferred.
The Alden State Bank scored 14 out of a possible 30 points on our test to measure the adequacy of a bank's capital, exceeding the national average of 13.38.

One important measure of this buffer is a bank's Tier 1 capital ratio. The Alden State Bank's Tier 1 capital ratio was 24.18 percent, exceeding the 6 percent level regulators consider adequate, but lower 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 challenges.

Overall, The Alden State Bank held equity amounting to 11.87 percent of its assets, which was lower than the national average of 12.10 percent.

Asset Quality Score

This test is intended to try to understand how the bank's loan loss reserves and overall capitalization could be affected by problem assets, such as unpaid mortgages.

A bank with large numbers of these types of assets may eventually be forced to use capital to absorb losses, reducing its cushion of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, pushing down earnings and increasing the chances of a failure in the future.

The Alden State Bank scored 40 out of a possible 40 points on Bankrate's test of asset quality, better than the national average of 37.62.

A handy indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of June 30, 2017, none of The Alden 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 known as an "allowance for loan and lease losses" to deal with problem assets . That reserve's size can be a helpful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on The Alden State Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance has an effect on its safety and soundness. A bank can retain its earnings, boosting its capital cushion, or use them to address problematic loans, potentially making the bank better able to withstand financial trouble. Conversely, losses take away from a bank's ability to do those things.

The Alden State Bank scored 4 out of a possible 30 on Bankrate's test of earnings, falling short of the national average of 16.52.

One widely used measure of a bank's earnings is return on equity, or net income (profit, basically) divided by total equity. The most recent annualized quarterly return on equity for The Alden State Bank was 1.04 percent, below the national average of 9.28 percent.

For the twelve months ended June 30, 2017, the bank reported net income of $12,000 on total equity of $2.3 million. The bank experienced an annualized return on average assets, or ROA, of 0.13 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.