Safe and Sound

Franklin State Bank

Franklin, NE
5
Star Rating
Franklin State Bank is a Franklin, NE-based, FDIC-insured bank dating back to 1901. As of December 31, 2017, the bank had equity of $8.4 million on assets of $46.4 million.

Thanks to the efforts of 10 full-time employees, the bank holds loans and leases worth $24.7 million, including $7.5 million worth of real estate loans. The bank currently holds $36.5 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, Franklin State Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a breakdown of 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?

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a bulwark against losses and as protection for depositors when a bank is experiencing financial trouble. It follows then that a bank's level of capital is a crucial measurement of a bank's financial fortitude. When it comes to safety and soundness, more capital is better.

Franklin State Bank achieved a score of 28 out of a possible 30 points on our test to measure capital adequacy, exceeding the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Franklin State Bank's Tier 1 capital ratio was 28.14 percent, exceeding the 6 percent level regulators consider adequate, and above 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, Franklin State Bank held equity amounting to 18.05 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

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

A bank with lots of these types of assets could eventually have to use capital to absorb losses, shrinking its buffer of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning interest for the bank, resulting in reduced earnings and potentially more risk of a failure in the future.

On Bankrate's test of asset quality, Franklin 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, 0.10 percent of Franklin 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 keep a reserve known as an "allowance for loan and lease losses" to deal with problem assets . The size of that reserve 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 Franklin 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, giving a boost to its capital cushion, or use them to deal with problematic loans, potentially making the bank better prepared to withstand financial trouble. However, banks that are losing money are less able to do those things.

On Bankrate's earnings test, Franklin State Bank scored 14 out of a possible 30, below 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. Franklin State Bank's most recent annualized quarterly return on equity was 6.69 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $557,000 on total equity of $8.4 million. The bank reported an annualized return on average assets, or ROA, of 1.21 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.