Safe and Sound

First State Bank of Decatur

Decatur, MI
5
Star Rating
Started in 1870, First State Bank of Decatur is an FDIC-insured bank based in Decatur, MI. As of December 31, 2017, the bank had equity of $10.3 million on assets of $52.9 million.

Thanks to the efforts of 14 full-time employees, the bank currently holds loans and leases worth $27.2 million, including $19.5 million worth of real estate loans. U.S. bank customers currently have $42.3 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, First State Bank of Decatur 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 major criteria Bankrate used to grade American banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial resilience, capital is important. It works as a bulwark against losses and provides protection for depositors when a bank is experiencing economic trouble. When looking at safety and soundness, the higher the capital, the better.

First State Bank of Decatur scored 30 out of a possible 30 points on our test to measure the adequacy of a bank's capital, above the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. First State Bank of Decatur's Tier 1 capital ratio was 41.65 percent, higher than the 6 percent level regulators consider adequate, and higher than the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to financial downturns.

Overall, First State Bank of Decatur held equity amounting to 19.52 percent of its assets, which exceeded the national average of 12.03 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 mortgages.

A bank with large numbers of these types of assets could eventually be forced to use capital to cover losses, diminishing its buffer 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, diminishing earnings and increasing the risk of a failure in the future.

First State Bank of Decatur scored 40 out of a possible 40 points on Bankrate's test of asset quality, above the national average of 37.49.

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, 0.85 percent of First State Bank of Decatur'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 to deal with troubled assets known as an "allowance for loan and lease losses." Comparing the reserve's size to the total amount of problem loans can be a handy indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on First State Bank of Decatur's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability affects its long-term survivability. Earnings can be retained by the bank, boosting its capital cushion, or be used to deal with problematic loans, likely making the bank more resilient in times of trouble. Obviously, banks that are losing money are less able to do those things.

First State Bank of Decatur fell behind the national average on Bankrate's earnings test, achieving a score of 8 out of a possible 30.

One important way to measure a bank's earnings is return on equity, calculated by dividing net income (profit, essentially) by total equity. First State Bank of Decatur's most recent annualized quarterly return on equity was 3.08 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $340,000 on total equity of $10.3 million. The bank had an annualized return on average assets, or ROA, of 0.61 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.