Safe and Sound

Ericson State Bank

Ericson, NE
5
Star Rating
Ericson, NE-based Ericson State Bank is an FDIC-insured bank started in 1959. Regulatory filings show the bank having equity of $8.6 million on $86.4 million in assets, as of December 31, 2017.

With 7 full-time employees, the bank has amassed loans and leases worth $76.7 million, including real estate loans of $29.9 million. U.S. bank customers currently have $74.1 million in deposits with the bank.

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

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SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a bulwark against losses and affords protection for depositors 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 looking at safety and soundness, the higher the capital, the better.

On our test to measure capital adequacy, Ericson State Bank received a score of 10 out of a possible 30 points, lower than the national average of 13.13.

One essential measure of this buffer is a bank's Tier 1 capital ratio. Ericson State Bank's Tier 1 capital ratio was 12.03 percent, higher than the 6 percent level regulators consider adequate, but under the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to financial challenges.

Overall, Ericson State Bank held equity amounting to 9.92 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to estimate the effect of problem assets, such as past-due loans, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

A bank with large numbers of these types of assets may eventually have to use capital to absorb losses, shrinking 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, diminishing earnings and elevating the risk of a future failure.

On Bankrate's asset quality test, Ericson 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 widely used indicator of asset quality.As of December 31, 2017, none of Ericson 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 troubled assets known as an "allowance for loan and lease losses." The size of that reserve can be a widely used indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on Ericson State Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money affects its safety and soundness. A bank can retain its earnings, boosting its capital cushion, or put them to work addressing problematic loans, likely making the bank better prepared to withstand financial trouble. However, banks that are losing money have less ability to do those things.

Ericson State Bank scored 24 out of a possible 30 on Bankrate's test of earnings, exceeding the national average of 15.12.

Return on equity, calculated by dividing net income (essentially, profit) by the total amount of equity, is one important measure of a bank's earnings. Ericson State Bank's most recent annualized quarterly return on equity was 16.74 percent, above the national average of 8.10 percent.

The bank reported net income of $1.4 million on total equity of $8.6 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 1.63 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.