Safe and Sound

CHARTER WEST BANK

West Point, NE
5
Star Rating
West Point, NE-based CHARTER WEST BANK is an FDIC-insured bank founded in 1985. As of December 31, 2017, the bank had equity of $22.6 million on assets of $235.2 million.

Thanks to the work of 85 full-time employees in 6 offices in NE, the bank holds loans and leases worth $175.0 million, including real estate loans of $76.6 million. U.S. bank customers currently have $202.6 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, CHARTER WEST 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 key criteria Bankrate used to grade U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

Capital works as a buffer against losses and affords protection for account holders when a bank is experiencing economic trouble. It follows then that a bank's level of capital is a useful measurement of a bank's financial strength. When it comes to safety and soundness, the more capital, the better.

On our test to measure the adequacy of a bank's capital, CHARTER WEST BANK received a score of 10 out of a possible 30 points, below the national average of 13.13.

One important measure of this buffer is a bank's Tier 1 capital ratio. CHARTER WEST BANK's Tier 1 capital ratio was 11.81 percent, higher than the 6 percent level considered adequate by regulators, but under the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather financial downturns.

Overall, CHARTER WEST BANK held equity amounting to 9.62 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test's purpose is 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 past-due loans.

A bank with large numbers of these types of assets could eventually be required to use capital to absorb losses, cutting down on its buffer of equity. It also means that there are likely to be many assets that are in non-accrual status and no longer earning interest for the bank, pushing down earnings and elevating the risk of a future failure.

CHARTER WEST BANK beat out the national average of 37.49 on Bankrate's asset quality test, racking up 40 out of a possible 40 points .

A helpful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.01 percent of CHARTER WEST 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 keep a reserve to handle problem assets known as an "allowance for loan and lease losses." How large that reserve is 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. CHARTER WEST BANK's loan loss allowance was 9,554.17 percent of its total noncurrent loans, higher than the national average. All things 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 long-term survivability. Earnings may be retained by the bank, expanding its capital buffer, or be used to deal with problematic loans, likely making the bank more resilient in times of trouble. Banks that are losing money, however, have less ability to do those things.

On Bankrate's test of earnings, CHARTER WEST BANK scored 24 out of a possible 30, above the national average of 15.12.

Return on equity, calculated by dividing net income (profit, basically) by the total amount of equity, is one important way to measure a bank's earnings. CHARTER WEST BANK's most recent annualized quarterly return on equity was 14.27 percent, above the national average of 8.10 percent.

The bank recorded net income of $3.2 million on total equity of $22.6 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 1.34 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.