Safe and Sound

Tecumseh Federal Bank

Tecumseh, NE
5
Star Rating
Tecumseh Federal Bank is a Tecumseh, NE-based, FDIC-insured bank founded in 1904. Regulatory filings show the bank having equity of $9.8 million on $51.1 million in assets, as of December 31, 2017.

With 10 full-time employees, the bank currently holds loans and leases worth $29.6 million, including real estate loans of $27.0 million. U.S. bank customers currently have $37.8 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Tecumseh Federal Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a look at how the bank did on the three key criteria Bankrate used to grade U.S. 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 cushion against losses and provides protection for account holders when a bank is experiencing economic trouble. It follows then that when it comes to measuring an an institution's financial resilience, capital is valuable. When looking at safety and soundness, more capital is preferred.

Tecumseh Federal Bank achieved a score of 30 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 commonly used measure of this buffer is a bank's Tier 1 capital ratio. Tecumseh Federal Bank's Tier 1 capital ratio was 40.55 percent, above 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 economic difficulties.

Overall, Tecumseh Federal Bank held equity amounting to 19.08 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to estimate 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.

A bank with large numbers of these kinds of assets may eventually be forced to use capital to cover losses, cutting down on its equity cushion. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, decreasing earnings and increasing the risk of a future failure.

Tecumseh Federal Bank scored above the national average of 37.49 on Bankrate's test of asset quality, racking up 40 out of a possible 40 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, 0.62 percent of Tecumseh Federal 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 keep a reserve to handle problem assets known as an "allowance for loan and lease losses." Comparing how large that reserve is to the total amount of problem loans can be a widely used indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Tecumseh Federal Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its safety and soundness. A bank can retain its earnings, boosting its capital buffer, or use them to address problematic loans, likely making the bank better prepared to withstand financial trouble. Losses, on the other hand, reduce a bank's ability to do those things.

Tecumseh Federal Bank scored 6 out of a possible 30 on Bankrate's earnings test, less than the national average of 15.12.

One widely used way to measure a bank's earnings is return on equity, or net income (profit, basically) divided by the total amount of equity. The most recent annualized quarterly return on equity for Tecumseh Federal Bank was 2.92 percent, below the national average of 8.10 percent.

The bank recorded net income of $282,000 on total equity of $9.8 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 0.55 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.