Safe and Sound

Alden State Bank

Alden, MI
5
Star Rating
Alden State Bank is an FDIC-insured bank founded in 1934 and currently based in Alden, MI. The bank holds equity of $23.5 million on assets of $192.7 million, according to December 31, 2017, regulatory filings.

U.S. bank customers have $167.4 million on deposit at 4 offices in MI run by 39 full-time employees. With that footprint, the bank has amassed loans and leases worth $143.9 million, $129.0 million of which are for real estate.

Overall, Bankrate believes that, as of December 31, 2017, Alden State Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a breakdown of how the bank fared on the three important criteria Bankrate used to evaluate 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 is a useful measurement of a bank's financial fortitude. It acts as a buffer against losses and provides protection for depositors when a bank is struggling financially. When looking at safety and soundness, the higher the capital, the better.

On our test to measure capital adequacy, Alden State Bank scored 16 out of a possible 30 points, beating out the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Alden State Bank's Tier 1 capital ratio was 14.80 percent, higher than the 6 percent level regulators consider adequate, but under the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather financial challenges.

Overall, Alden State Bank held equity amounting to 12.21 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 mortgages.

Having a large number of these types of assets may eventually require a bank to use capital to cover losses, reducing 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, resulting in diminished earnings and potentially more risk of a failure in the future.

Alden State Bank beat out the national average of 37.49 on Bankrate's asset quality test, racking up 40 out of a possible 40 points .

A helpful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.84 percent of Alden State 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 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 problem 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 Alden State Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability has an effect on its long-term survivability. Earnings can be retained by the bank, boosting its capital buffer, or be used to address problematic loans, likely making the bank better prepared to withstand financial trouble. Conversely, losses diminish a bank's ability to do those things.

Alden State Bank scored 18 out of a possible 30 on Bankrate's test of earnings, above 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. Alden State Bank's most recent annualized quarterly return on equity was 9.61 percent, above the national average of 8.10 percent.

The bank earned net income of $2.2 million on total equity of $23.5 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 1.16 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above 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.