Safe and Sound

Custer Federal State Bank

Broken Bow, NE
5
Star Rating
Started in 1925, Custer Federal State Bank is an FDIC-insured bank based in Broken Bow, NE. Regulatory filings show the bank having equity of $13.1 million on assets of $132.9 million, as of December 31, 2017.

U.S. bank customers have $103.6 million on deposit at 2 offices in NE run by 26 full-time employees. With that footprint, the bank has amassed loans and leases worth $107.8 million, $64.7 million of which are for real estate.

Overall, Bankrate believes that, as of December 31, 2017, Custer Federal State Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's an analysis of how the bank did on the three key criteria Bankrate used to grade U.S. banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial resilience, capital is key. It acts as a bulwark against losses and as protection for depositors when a bank is experiencing financial trouble. When looking at safety and soundness, the more capital, the better.

Custer Federal State Bank fell short of the national average of 13.13 on our test to measure capital adequacy, achieving a score of 10 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Custer Federal State Bank's Tier 1 capital ratio was 12.10 percent, exceeding the 6 percent level considered adequate by regulators, but below the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to economic headwinds.

Overall, Custer Federal State Bank held equity amounting to 9.83 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to try to understand how the bank's capitalization and allocated loan loss reserves could be affected by problem assets, such as unpaid loans.

A bank with extensive holdings of these kinds of assets may eventually be required to use capital to absorb losses, decreasing its equity buffer. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, resulting in depressed earnings and potentially more risk of a failure in the future.

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

The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of December 31, 2017, 0.55 percent of Custer Federal 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 how large that reserve is to the total amount of at-risk loans can be a widely used indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Custer Federal State Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its long-term survivability. A bank can retain its earnings, boosting its capital buffer, or use them to address 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.

Custer Federal State Bank scored 20 out of a possible 30 on Bankrate's earnings test, better than the national average of 15.12.

Return on equity, calculated by dividing net income (profit, basically) by the total amount of equity, is one widely used measure of a bank's earnings. Custer Federal State Bank's most recent annualized quarterly return on equity was 11.83 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $1.4 million on total equity of $13.1 million. The bank reported an annualized return on average assets, or ROA, of 1.08 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.