Safe and Sound

Cedar Security Bank

Fordyce, NE
3
Star Rating
Cedar Security Bank is an FDIC-insured bank founded in 1984 and currently based in Fordyce, NE. Regulatory filings show the bank having equity of $6.4 million on assets of $54.7 million, as of December 31, 2017.

Thanks to the work of 15 full-time employees in 3 offices in NE, the bank holds loans and leases worth $33.4 million, including real estate loans of $15.3 million. The bank currently holds $45.9 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, Cedar Security Bank exhibited a generally satisfactory condition, earning 3 out of 5 stars for safety and soundness. Keep reading for a breakdown of how the bank fared on the three important criteria Bankrate used to grade American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a bulwark against losses and as protection for depositors when a bank is experiencing financial trouble. Therefore, a bank's level of capital is a useful measurement of a bank's financial resilience. When it comes to safety and soundness, more capital is better.

Cedar Security Bank beat out the national average of 13.13 points on our test to measure the adequacy of a bank's capital, racking up 14 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Cedar Security Bank's Tier 1 capital ratio was 14.24 percent, exceeding the 6 percent level regulators consider adequate, but lower than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather financial challenges.

Overall, Cedar Security Bank held equity amounting to 11.69 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test is intended to estimate how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by troubled assets, such as unpaid loans.

A bank with large numbers of these types of assets could eventually be required to use capital to cover losses, diminishing its equity buffer. 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, diminishing earnings and increasing the chances of a failure in the future.

Cedar Security Bank fell below the national average of 37.49 on Bankrate's test of asset quality, racking up 32 out of a possible 40 points .

The percentage of problem assets a bank holds compared to its total assets is a widely used indicator of asset quality.As of December 31, 2017, 2.59 percent of Cedar Security Bank's loans were noncurrent -- in other words, they were more than 90 days past due or were in non-accrual status. That's above the national average of 1.01 percent.

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

Earnings score

A bank's ability to earn money has an effect on its safety and soundness. Earnings can be retained by the bank, expanding its capital cushion, or be used to deal with problematic loans, potentially making the bank better prepared to withstand economic trouble. Banks that are losing money, however, have less ability to do those things.

Cedar Security Bank did below-average on Bankrate's test of earnings, achieving a score of 6 out of a possible 30.

One key measure of a bank's earnings is return on equity, or net income (profit, basically) divided by the total amount of equity. The most recent annualized quarterly return on equity for Cedar Security Bank was 2.38 percent, below the national average of 8.10 percent.

The bank recorded net income of $151,000 on total equity of $6.4 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.28 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below 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.