Safe and Sound

Nebraska State Bank

3
Star Rating
Nebraska State Bank is a Lynch, NE-based, FDIC-insured bank that opened its doors in 1946. As of December 31, 2017, the bank held equity of $2.1 million on assets of $13.4 million.

Thanks to the efforts of 6 full-time employees, the bank has amassed loans and leases worth $6.8 million, $2.1 million of which are for real estate. U.S. bank customers currently have $11.2 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Nebraska State Bank exhibited a generally satisfactory condition, earning 3 out of 5 stars for safety and soundness. Here's an analysis of how the bank fared on the three important criteria Bankrate used to score U.S. banks.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

Capital is an important measurement of a bank's financial fortitude. It works as a cushion against losses and as protection for accountholders when a bank is experiencing economic trouble. When looking at safety and soundness, more capital is preferred.

Nebraska State Bank racked up 22 out of a possible 30 points on our test to measure the adequacy of a bank's capital, beating out the national average of 13.13.

One important measure of this buffer is a bank's Tier 1 capital ratio. Nebraska State Bank's Tier 1 capital ratio was 26.07 percent, higher than the 6 percent level considered adequate by regulators, and higher than the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to financial difficulties.

Overall, Nebraska State Bank held equity amounting to 16.00 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to try to understand how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by problem assets, such as unpaid mortgages.

Having lots of these kinds of assets means a bank could have to use capital to cover losses, shrinking its equity cushion. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning interest for the bank, decreasing earnings and increasing the risk of a failure in the future.

Nebraska State Bank fell short of the national average of 37.49 on Bankrate's asset quality test, racking up 32 out of a possible 40 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, 5.10 percent of Nebraska 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 above the national average of 1.01 percent.

Banks keep a reserve to handle troubled assets known as an "allowance for loan and lease losses." That reserve's size can be a widely used indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on Nebraska State Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money affects its long-term survivability. Earnings can be retained by the bank, expanding its capital cushion, or be used to deal with problematic loans, likely making the bank more resilient in tough times. Banks that are losing money, however, are less able to do those things.

On Bankrate's test of earnings, Nebraska State Bank scored 0 out of a possible 30, failing to reach the national average of 15.12.

Return on equity, calculated by dividing net income (profit, essentially) by total equity, is one widely used measure of a bank's earnings. The most recent annualized quarterly return on equity for Nebraska State Bank was -0.19 percent, below the national average of 8.10 percent.

The bank reported net income of $-4,000 on total equity of $2.1 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of -0.03 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.