Safe and Sound

Arthur State Bank

Union, SC
4
Star Rating
Started in 1933, Arthur State Bank is an FDIC-insured bank based in Union, SC. The bank has equity of $44.1 million on assets of $491.1 million, according to December 31, 2017, regulatory filings.

With 155 full-time employees in 18 offices in SC, the bank has amassed loans and leases worth $334.0 million, including real estate loans of $300.5 million. U.S. bank customers currently have $437.1 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Arthur State Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's an analysis of how the bank fared on the three major criteria Bankrate used to score American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital is an essential measurement of a bank's financial strength. It acts as a buffer against losses and provides protection for accountholders during periods of economic instability for the bank. When it comes to safety and soundness, the higher the capital, the better.

Arthur State Bank received a score of 8 out of a possible 30 points on our test to measure capital adequacy, coming in below the national average of 13.13.

A bank's Tier 1 capital ratio is a widely used measure of this buffer. Arthur State Bank's Tier 1 capital ratio was 13.04 percent, exceeding the 6 percent level considered adequate by regulators, but under the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather economic challenges.

Overall, Arthur State Bank held equity amounting to 8.98 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test is intended 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 past-due mortgages.

A bank with a large number of these kinds of assets could eventually have to use capital to absorb losses, shrinking its equity cushion. Many of those assets are also likely to be in non-accrual status and thus aren't earning interest for the bank, decreasing earnings and increasing the chances of a future failure.

Arthur State Bank scored below the national average of 37.49 on Bankrate's asset quality test, racking up 36 out of a possible 40 points .

The percentage of problem assets a bank holds compared to its total assets is a useful indicator of asset quality.As of December 31, 2017, 0.23 percent of Arthur 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 maintain a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . That reserve's size can be a helpful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on Arthur State Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its safety and soundness. A bank can retain its earnings, boosting its capital cushion, or use them to address problematic loans, potentially making the bank better able to withstand economic shocks. However, banks that are losing money have less ability to do those things.

On Bankrate's test of earnings, Arthur State Bank scored 18 out of a possible 30, beating out the national average of 15.12.

Return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for Arthur State Bank was 9.35 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $4.1 million on total equity of $44.1 million. The bank had an annualized return on average assets, or ROA, of 0.84 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.