Safe and Sound

Sherburne State Bank

Becker, MN
4
Star Rating
Sherburne State Bank is a Becker, MN-based, FDIC-insured bank dating back to 1920. The bank has equity of $9.2 million on $107.9 million in assets, according to December 31, 2017, regulatory filings.

Thanks to the work of 24 full-time employees in 3 offices in MN, the bank has amassed loans and leases worth $74.7 million, including real estate loans of $65.3 million. The bank currently holds $97.3 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, Sherburne State Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a look at how the bank did on the three key criteria Bankrate used to grade U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a cushion against losses and affords protection for depositors during times of financial instability for the bank. Therefore, a bank's level of capital is a crucial measurement of a bank's financial fortitude. When it comes to safety and soundness, more capital is better.

Sherburne State Bank received a score of 8 out of a possible 30 points on our test to measure capital adequacy, less than the national average of 13.13.

One widely used measure of this buffer is a bank's Tier 1 capital ratio. Sherburne State Bank's Tier 1 capital ratio was 11.76 percent, above the 6 percent level regulators consider adequate, but less than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather economic challenges.

Overall, Sherburne State Bank held equity amounting to 8.49 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to estimate the impact of problem assets, such as unpaid mortgages, on the bank's loan loss reserves and overall capitalization.

Having a large number of these types of assets means a bank may have to use capital to cover losses, shrinking its equity cushion. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, resulting in reduced earnings and potentially more risk of a future failure.

Sherburne State Bank scored 32 out of a possible 40 points on Bankrate's asset quality test, failing to reach 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, 0.64 percent of Sherburne 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 how large that reserve is to the total amount of at-risk 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 Sherburne State Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money affects its long-term survivability. A bank can retain its earnings, boosting its capital cushion, or put them to work addressing problematic loans, likely making the bank better able to withstand financial shocks. Obviously, banks that are losing money are less able to do those things.

On Bankrate's earnings test, Sherburne State Bank scored 28 out of a possible 30, beating out the national average of 15.12.

One widely used measure of a bank's earnings is return on equity, or net income (profit, basically) divided by the total amount of equity. The most recent annualized quarterly return on equity for Sherburne State Bank was 20.64 percent, above the national average of 8.10 percent.

The bank earned net income of $1.8 million on total equity of $9.2 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 1.77 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.