Safe and Sound

CerescoBank

Ceresco, NE
5
Star Rating
CerescoBank is an FDIC-insured bank founded in 1911 and currently headquartered in Ceresco, NE. The bank holds equity of $7.6 million on assets of $46.9 million, according to December 31, 2017, regulatory filings.

Thanks to the efforts of 11 full-time employees, the bank holds loans and leases worth $30.2 million, $17.2 million of which are for real estate. The bank currently holds $39.1 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, CerescoBank exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for an analysis of how the bank fared on the three important criteria Bankrate used to score U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a cushion against losses and as protection for depositors during periods of economic instability for the bank. It follows then that when it comes to measuring an a bank's financial stability, capital is key. When looking at safety and soundness, the more capital, the better.

CerescoBank racked up 24 out of a possible 30 points on our test to measure capital adequacy, above the national average of 13.13.

A bank's Tier 1 capital ratio is a widely followed measure of this buffer. CerescoBank's Tier 1 capital ratio was 17.68 percent, higher than the 6 percent level considered adequate by regulators, but lower than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to financial downturns.

Overall, CerescoBank held equity amounting to 16.29 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 problem assets, such as unpaid mortgages.

A bank with large numbers of these kinds of assets may eventually be required to use capital to cover losses, decreasing its equity cushion. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, diminishing earnings and increasing the risk of a failure in the future.

CerescoBank scored 40 out of a possible 40 points on Bankrate's test of asset quality, exceeding the national average of 37.49.

The percentage of problem assets a bank holds compared to its total assets is a handy indicator of asset quality.As of December 31, 2017, 0.23 percent of CerescoBank'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 keep a reserve to deal with troubled assets known as an "allowance for loan and lease losses." How large that reserve is can be a handy indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on CerescoBank's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability has an effect on its long-term survivability. Earnings can be retained by the bank, expanding its capital buffer, or be used to address problematic loans, potentially making the bank more resilient in tough times. However, banks that are losing money are less able to do those things.

CerescoBank received below-average marks on Bankrate's earnings test, achieving a score of 12 out of a possible 30.

One important way to measure a bank's earnings is return on equity, or net income (essentially profit) divided by the total amount of equity. The most recent annualized quarterly return on equity for CerescoBank was 5.11 percent, below the national average of 8.10 percent.

The bank earned net income of $386,000 on total equity of $7.6 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 0.83 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.