Safe and Sound

Adams State Bank

Adams, NE
5
Star Rating
Adams, NE-based Adams State Bank is an FDIC-insured bank started in 1918. The bank has equity of $9.4 million on assets of $50.5 million, according to December 31, 2017, regulatory filings.

With 9 full-time employees, the bank currently holds loans and leases worth $33.6 million, including real estate loans of $17.3 million. U.S. bank customers currently have $32.8 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Adams State Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a look at how the bank fared on the three important criteria Bankrate used to score American banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital is a valuable measurement of an institution's financial strength. It acts as a bulwark against losses and provides protection for depositors when a bank is struggling financially. When looking at safety and soundness, the higher the capital, the better.

On our test to measure capital adequacy, Adams State Bank scored 28 out of a possible 30 points, exceeding the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Adams State Bank's Tier 1 capital ratio was 25.24 percent, above the 6 percent level considered adequate by regulators, but below the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to financial headwinds.

Overall, Adams State Bank held equity amounting to 18.62 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to determine the effect of troubled assets, such as past-due mortgages, on the bank's capitalization and allocated loan loss reserves.

Having large numbers of these types of assets means a bank could eventually have to use capital to absorb losses, reducing its cushion of equity. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, pushing down earnings and increasing the chances of a failure in the future.

On Bankrate's asset quality test, Adams State Bank scored 40 out of a possible 40 points, exceeding the national average of 37.49 points.

The percentage of problem assets a bank holds compared to its total assets is a useful indicator of asset quality.As of December 31, 2017, 0.01 percent of Adams 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 1.01 percent.

Banks maintain a reserve known as an "allowance for loan and lease losses" to deal with problem assets . Comparing the size of that reserve to the total amount of problematic loans can be a widely used indicator when evaluating a bank's ability to manage troubled assets. Adams State Bank's loan loss allowance was 5,800.00 percent of its total noncurrent loans, exceeding the national average. All else being equal, the higher the ratio of loan loss allowance to noncurrent loans, the better.

Earnings score

How profitable a bank is has an effect on its safety and soundness. Earnings may be retained by the bank, boosting its capital buffer, or be used to deal with problematic loans, likely making the bank more resilient in times of trouble. Losses, on the other hand, diminish a bank's ability to do those things.

Adams State Bank scored 14 out of a possible 30 on Bankrate's earnings test, below the national average of 15.12.

Return on equity, calculated by dividing net income (essentially, profit) by total equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for Adams State Bank was 6.45 percent, below the national average of 8.10 percent.

The bank earned net income of $601,000 on total equity of $9.4 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 1.20 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above the average for U.S. banks of 1.00 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.