Safe and Sound

Dearborn Federal Savings Bank

Dearborn, MI
5
Star Rating
Dearborn Federal Savings Bank is an FDIC-insured bank started in 1936 and currently headquartered in Dearborn, MI. The bank holds equity of $74.6 million on assets of $257.1 million, according to December 31, 2017, regulatory filings.

Thanks to the efforts of 44 full-time employees in 5 offices in MI, the bank has amassed loans and leases worth $185.7 million, including real estate loans of $188.1 million. U.S. bank customers currently have $179.0 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Dearborn Federal Savings Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for an analysis of how the bank fared on the three important criteria Bankrate used to evaluate American banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a bulwark against losses and affords protection for account holders when a bank is struggling financially. Therefore, a bank's level of capital is a crucial measurement of a bank's financial fortitude. When looking at safety and soundness, the more capital, the better.

Dearborn Federal Savings Bank exceeded the national average of 13.13 points on our test to measure capital adequacy, achieving a score of 30 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Dearborn Federal Savings Bank's Tier 1 capital ratio was 58.28 percent, exceeding the 6 percent level regulators consider adequate, and above the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather economic difficulties.

Overall, Dearborn Federal Savings Bank held equity amounting to 29.00 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to estimate the impact of problem assets, such as past-due loans, on the bank's capitalization and allocated loan loss reserves.

Having a large number of these types of assets suggests a bank could have to use capital to absorb losses, reducing its cushion of equity. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, decreasing earnings and elevating the risk of a failure in the future.

On Bankrate's asset quality test, Dearborn Federal Savings Bank scored 40 out of a possible 40 points, better than the national average of 37.49 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, 0.44 percent of Dearborn Federal Savings 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 1.01 percent.

Banks keep a reserve to deal with problem assets known as an "allowance for loan and lease losses." That reserve's size can be a widely used indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on Dearborn Federal Savings Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance has an effect on its safety and soundness. A bank can retain its earnings, boosting its capital cushion, or use them to deal with problematic loans, potentially making the bank better prepared to withstand financial trouble. Conversely, losses lessen a bank's ability to do those things.

Dearborn Federal Savings Bank did below-average on Bankrate's earnings test, achieving a score of 8 out of a possible 30.

One key way to measure a bank's earnings is return on equity, calculated by dividing net income (profit, essentially) by total equity. The most recent annualized quarterly return on equity for Dearborn Federal Savings Bank was 3.44 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $2.5 million on total equity of $74.6 million. The bank reported an annualized return on average assets, or ROA, of 0.95 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.