Safe and Sound

The Potter State Bank of Potter

Potter, NE
5
Star Rating
Potter, NE-based The Potter State Bank of Potter is an FDIC-insured bank started in 1945. Regulatory filings show the bank having equity of $5.2 million on $39.2 million in assets, as of December 31, 2017.

U.S. bank customers have $33.2 million on deposit at 2 offices in NE run by 9 full-time employees. With that footprint, the bank currently holds loans and leases worth $18.0 million, including real estate loans of $3.6 million.

Overall, Bankrate believes that, as of December 31, 2017, The Potter State Bank of Potter 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 evaluate U.S. banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a cushion against losses and provides protection for account holders during periods of financial trouble for the bank. Therefore, a bank's level of capital is a useful measurement of an institution's financial fortitude. From a safety and soundness perspective, more capital is better.

The Potter State Bank of Potter did better than the national average of 13.13 points on our test to measure capital adequacy, achieving a score of 18 out of a possible 30 points.

A bank's Tier 1 capital ratio is a commonly used measure of this buffer. The Potter State Bank of Potter's Tier 1 capital ratio was 20.28 percent, higher than the 6 percent level considered adequate by regulators, but lower than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather financial challenges.

Overall, The Potter State Bank of Potter held equity amounting to 13.31 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test is intended to estimate how the bank's loan loss reserves and overall capitalization could be affected by problem assets, such as past-due loans.

Having large numbers of these kinds of assets means a bank could have to use capital to cover losses, decreasing its buffer of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, reducing earnings and elevating the chances of a failure in the future.

The Potter State Bank of Potter 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 handy indicator of asset quality.As of December 31, 2017, 0.24 percent of The Potter State Bank of Potter'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 known as an "allowance for loan and lease losses" to deal with troubled assets . Comparing the size of that reserve to the total amount of problematic loans can be a handy indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on The Potter State Bank of Potter's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance affects its safety and soundness. Earnings can be retained by the bank, increasing its capital buffer, or be used to address problematic loans, potentially making the bank more resilient in times of trouble. Obviously, banks that are losing money are less able to do those things.

The Potter State Bank of Potter scored 16 out of a possible 30 on Bankrate's earnings test, above the national average of 15.12.

One widely used way to measure a bank's earnings is return on equity, or net income (essentially profit) divided by total equity. The most recent annualized quarterly return on equity for The Potter State Bank of Potter was 7.74 percent, below the national average of 8.10 percent.

The bank recorded net income of $389,000 on total equity of $5.2 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 0.99 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.