Safe and Sound

Generations Bank

Exeter, NE
4
Star Rating
Exeter, NE-based Generations Bank is an FDIC-insured bank started in 1934. As of December 31, 2017, the bank had equity of $4.3 million on $39.8 million in assets.

Thanks to the efforts of 9 full-time employees, the bank currently holds loans and leases worth $30.1 million, $12.0 million of which are for real estate. The bank currently holds $31.2 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, Generations Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a look at how the bank did on the three major criteria Bankrate used to grade American banks.

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SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a cushion against losses and affords protection for depositors during periods of economic instability for the bank. Therefore, when it comes to measuring an a bank's financial strength, capital is important. From a safety and soundness perspective, the higher the capital, the better.

Generations Bank came in below the national average of 13.13 on our test to measure capital adequacy, scoring 10 out of a possible 30 points.

One essential measure of this buffer is a bank's Tier 1 capital ratio. Generations Bank's Tier 1 capital ratio was 11.03 percent, higher than the 6 percent level regulators consider adequate, but lower than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather financial challenges.

Overall, Generations Bank held equity amounting to 10.81 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 loan loss reserves and overall capitalization could be affected by troubled assets, such as past-due loans.

Having lots of these types of assets suggests a bank could eventually have to use capital to absorb losses, reducing 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 lower earnings and potentially more risk of a future failure.

Generations Bank did better than the national average of 37.49 on Bankrate's asset quality test, racking up 40 out of a possible 40 points .

The percentage of problem assets a bank holds compared to its total assets is a useful indicator of asset quality.As of December 31, 2017, none of Generations 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 to handle troubled assets known as an "allowance for loan and lease losses." Comparing the reserve's size to the total amount of at-risk loans can be a helpful indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Generations Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability affects its long-term survivability. Earnings can be retained by the bank, increasing its capital cushion, or be used to address problematic loans, likely making the bank better able to withstand economic shocks. Banks that are losing money, however, have less ability to do those things.

Generations Bank scored 14 out of a possible 30 on Bankrate's test of earnings, falling short of the national average of 15.12.

Return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity, is one important way to measure a bank's earnings. Generations Bank's most recent annualized quarterly return on equity was 6.97 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $290,000 on total equity of $4.3 million. The bank had an annualized return on average assets, or ROA, of 0.75 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.