Safe and Sound

Sterling Bank

Barron, WI
5
Star Rating
Sterling Bank is a Barron, WI-based, FDIC-insured bank founded in 1885. The bank has equity of $20.0 million on assets of $227.2 million, according to June 30, 2017, regulatory filings.

Thanks to the efforts of 49 full-time employees in 4 offices in WI, the bank has amassed loans and leases worth $155.3 million, $132.6 million of which are for real estate. The bank currently holds $204.3 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of June 30, 2017, Sterling Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a look at how the bank did on the three key criteria Bankrate used to score U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a cushion against losses and provides protection for accountholders when a bank is struggling financially. It follows then that a bank's level of capital is a useful measurement of a bank's financial strength. From a safety and soundness perspective, more capital is preferred.
Sterling Bank received a score of 8 out of a possible 30 points on our test to measure the adequacy of a bank's capital, coming in below the national average of 13.38.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Sterling Bank's Tier 1 capital ratio was 11.79 percent, exceeding the 6 percent level considered adequate by regulators, but less than the national average of 25.16 percent. A higher capital ratio suggests the bank will be better able to weather financial challenges.

Overall, Sterling Bank held equity amounting to 8.79 percent of its assets, which was lower than the national average of 12.10 percent.

Asset Quality Score

This test's purpose is to try to understand how the bank's capitalization and allocated loan loss reserves could be affected by problem assets, such as unpaid loans.

Having large numbers of these types of assets suggests a bank may eventually have to use capital to cover losses, shrinking its cushion of equity. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning money, resulting in diminished earnings and potentially more risk of a future failure.

Sterling Bank exceeded the national average of 37.62 on Bankrate's test of asset quality, racking up 40 out of a possible 40 points .

A handy indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of June 30, 2017, 0.64 percent of Sterling Bank'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 1.04 percent.

Banks maintain a reserve to handle problem assets known as an "allowance for loan and lease losses." The size of that reserve 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 Sterling Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its long-term survivability. Earnings may be retained by the bank, expanding its capital cushion, or be used to address problematic loans, likely making the bank more resilient in tough times. Losses, on the other hand, lessen a bank's ability to do those things.

On Bankrate's test of earnings, Sterling Bank scored 26 out of a possible 30, better than the national average of 16.52.

Return on equity, calculated by dividing net income (profit, essentially) by total equity, is one important way to measure a bank's earnings. Sterling Bank's most recent annualized quarterly return on equity was 17.01 percent, above the national average of 9.28 percent.

The bank earned net income of $1.7 million on total equity of $20.0 million for the twelve months ended June 30, 2017. The bank experienced an annualized return on average assets, or ROA, of 1.47 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above the average for U.S. banks of 1.14 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.