Safe and Sound

The Nehawka Bank

Nehawka, NE
5
Star Rating
The Nehawka Bank is an FDIC-insured bank started in 1895 and currently headquartered in Nehawka, NE. The bank holds equity of $2.7 million on $15.2 million in assets, according to December 31, 2017, regulatory filings.

U.S. bank customers have $12.5 million on deposit at 2 offices in NE run by 5 full-time employees. With that footprint, the bank currently holds loans and leases worth $11.7 million, including real estate loans of $8.8 million.

Overall, Bankrate believes that, as of December 31, 2017, The Nehawka Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a look at how the bank fared on the three important criteria Bankrate used to evaluate U.S. banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a buffer against losses and affords protection for account holders when a bank is struggling financially. It follows then that when it comes to measuring an an institution's financial strength, capital is key. When looking at safety and soundness, the higher the capital, the better.

On our test to measure capital adequacy, The Nehawka Bank achieved a score of 26 out of a possible 30 points, above the national average of 13.13.

A bank's Tier 1 capital ratio is a widely used measure of this buffer. The Nehawka Bank's Tier 1 capital ratio was 26.35 percent, above the 6 percent level considered adequate by regulators, and above the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather economic downturns.

Overall, The Nehawka Bank held equity amounting to 17.67 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 capitalization and allocated loan loss reserves could be affected by troubled assets, such as past-due mortgages.

A bank with a large number of these types of assets may eventually have to use capital to cover losses, diminishing its equity buffer. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, resulting in diminished earnings and potentially more risk of a failure in the future.

On Bankrate's asset quality test, The Nehawka Bank scored 40 out of a possible 40 points, better than the national average of 37.49 points.

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

Earnings score

How profitable a bank is affects its safety and soundness. Earnings can be retained by the bank, boosting its capital cushion, or be used to deal with problematic loans, likely making the bank better able to withstand economic trouble. Banks that are losing money, however, are less able to do those things.

On Bankrate's test of earnings, The Nehawka Bank scored 4 out of a possible 30, less than the national average of 15.12.

Return on equity, calculated by dividing net income (profit, basically) by total equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for The Nehawka Bank was 1.31 percent, below the national average of 8.10 percent.

The bank reported net income of $35,000 on total equity of $2.7 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 0.22 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.