Safe and Sound

Gothenburg State Bank

Gothenburg, NE
5
Star Rating
Gothenburg State Bank is a Gothenburg, NE-based, FDIC-insured bank started in 1902. Regulatory filings show the bank having equity of $19.2 million on assets of $151.2 million, as of December 31, 2017.

Thanks to the work of 30 full-time employees in 2 offices in NE, the bank has amassed loans and leases worth $106.7 million, $46.2 million of which are for real estate. The bank currently holds $126.0 million in deposits from U.S. customers.

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

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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 struggling financially. It follows then that a bank's level of capital is a crucial measurement of a bank's financial resilience. When looking at safety and soundness, the higher the capital, the better.

Gothenburg State Bank did better than the national average of 13.13 points on our test to measure capital adequacy, racking up 16 out of a possible 30 points.

A bank's Tier 1 capital ratio is a commonly used measure of this buffer. Gothenburg State Bank's Tier 1 capital ratio was 14.71 percent, exceeding the 6 percent level considered adequate by regulators, but lower than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to economic downturns.

Overall, Gothenburg State Bank held equity amounting to 12.67 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to estimate the impact of problem assets, such as past-due loans, on the bank's loan loss reserves and overall capitalization.

A bank with a large number of these kinds of assets may eventually have to use capital to absorb losses, shrinking its cushion 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 increasing the chances of a future failure.

Gothenburg State Bank finished below the national average of 37.49 on Bankrate's test of asset quality, racking up 36 out of a possible 40 points .

A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 1.69 percent of Gothenburg State Bank's loans were noncurrent, meaning they were more than 90 days past due or were in non-accrual status. That's above the national average of 1.01 percent.

Banks maintain a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . That reserve's size can be a handy indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on Gothenburg State Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its safety and soundness. A bank can retain its earnings, giving a boost to its capital buffer, or use them to deal with problematic loans, potentially making the bank more resilient in times of trouble. Banks that are losing money, however, are less able to do those things.

On Bankrate's earnings test, Gothenburg State Bank scored 22 out of a possible 30, above 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 way to measure a bank's earnings. Gothenburg State Bank's most recent annualized quarterly return on equity was 12.28 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $2.3 million on total equity of $19.2 million. The bank reported an annualized return on average assets, or ROA, of 1.60 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.