Safe and Sound

Ashton State Bank

Ashton, IA
5
Star Rating
Ashton State Bank is an FDIC-insured bank founded in 1884 and currently headquartered in Ashton, IA. As of December 31, 2017, the bank had equity of $6.1 million on assets of $48.8 million.

With 7 full-time employees, the bank has amassed loans and leases worth $31.3 million, including real estate loans of $19.1 million. U.S. bank customers currently have $34.2 million in deposits with the bank.

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

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THE INSTITUTION'S SCORE

Capital Score

Capital is a key measurement of an institution's financial fortitude. It works as a cushion against losses and affords protection for depositors when a bank is struggling financially. When looking at safety and soundness, the more capital, the better.

On our test to measure capital adequacy, Ashton State Bank racked up 16 out of a possible 30 points, better than the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Ashton State Bank's Tier 1 capital ratio was 15.50 percent, above the 6 percent level regulators consider adequate, but under the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to economic challenges.

Overall, Ashton State Bank held equity amounting to 12.51 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to estimate how the bank's capitalization and allocated loan loss reserves could be affected by troubled assets, such as past-due loans.

A bank with a large number of these kinds of assets may eventually be forced to use capital to cover losses, diminishing its equity buffer. Many of those assets are also likely to be in non-accrual status and no longer earning money, resulting in reduced earnings and potentially more risk of a failure in the future.

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

A handy indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.04 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 below the national average of 1.01 percent.

Banks maintain a reserve to handle problem assets known as an "allowance for loan and lease losses." That reserve's size can be a useful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of at-risk loans. Ashton State Bank's loan loss allowance was 2,361.54 percent of its total noncurrent loans, above the national average. All else being equal, the higher the ratio of loan loss allowance to noncurrent loans, the better.

Earnings score

A bank's earnings performance has an effect on its long-term survivability. A bank can retain its earnings, giving a boost to its capital buffer, or put them to work addressing problematic loans, likely making the bank more resilient in tough times. However, banks that are losing money have less ability to do those things.

On Bankrate's earnings test, Ashton State Bank scored 22 out of a possible 30, above the national average of 15.12.

Return on equity, calculated by dividing net income (profit, essentially) by total equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for Ashton State Bank was 12.15 percent, above the national average of 8.10 percent.

The bank earned net income of $735,000 on total equity of $6.1 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 1.50 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.