Safe and Sound

State Bank Northwest

Spokane Valley, WA
4
Star Rating
State Bank Northwest is a Spokane Valley, WA-based, FDIC-insured bank dating back to 1902. As of December 31, 2017, the bank held equity of $15.0 million on assets of $140.2 million.

With 26 full-time employees in 3 offices in WA, the bank has amassed loans and leases worth $97.5 million, including real estate loans of $70.8 million. U.S. bank customers currently have $124.0 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, State Bank Northwest exhibited a good condition, earning 4 out of 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.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a cushion against losses and provides protection for depositors when a bank is struggling financially. It follows then that a bank's level of capital is an essential measurement of an institution's financial fortitude. When it comes to safety and soundness, more capital is better.

State Bank Northwest received a score of 12 out of a possible 30 points on our test to measure the adequacy of a bank's capital, less than the national average of 13.13.

A bank's Tier 1 capital ratio is an essential measure of this buffer. State Bank Northwest's Tier 1 capital ratio was 14.15 percent, higher than the 6 percent level considered adequate by regulators, but lower than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to economic downturns.

Overall, State Bank Northwest held equity amounting to 10.68 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

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

Having large numbers of these types of assets suggests a bank may have to use capital to absorb losses, cutting down on its equity buffer. 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.

State Bank Northwest finished below the national average of 37.49 on Bankrate's asset quality test, racking up 32 out of a possible 40 points .

The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of December 31, 2017, 2.08 percent of State Bank Northwest's loans were noncurrent -- in other words, they were more than 90 days past due or were in non-accrual status. That's above the national average of 1.01 percent.

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

Earnings score

A bank's profitability affects its safety and soundness. Earnings can be retained by the bank, increasing its capital buffer, or be used to deal with problematic loans, likely making the bank better prepared to withstand economic trouble. Banks that are losing money, however, are less able to do those things.

On Bankrate's earnings test, State Bank Northwest scored 20 out of a possible 30, better than the national average of 15.12.

One key way to measure a bank's earnings is return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity. State Bank Northwest's most recent annualized quarterly return on equity was 11.09 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $1.6 million on total equity of $15.0 million. The bank reported an annualized return on average assets, or ROA, of 1.20 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.