Safe and Sound

State Bank of Bellingham

Bellingham, MN
5
Star Rating
Founded in 1942, State Bank of Bellingham is an FDIC-insured bank headquartered in Bellingham, MN. As of December 31, 2017, the bank had equity of $5.6 million on $52.4 million in assets.

With 6 full-time employees, the bank has amassed loans and leases worth $47.7 million, including real estate loans of $32.1 million. U.S. bank customers currently have $35.8 million in deposits with the bank.

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

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial stability, capital is key. It works as a cushion against losses and provides protection for accountholders when a bank is experiencing economic instability. From a safety and soundness perspective, more capital is preferred.

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

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. State Bank of Bellingham's Tier 1 capital ratio was 12.41 percent, exceeding the 6 percent level considered adequate by regulators, but less 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 of Bellingham held equity amounting to 10.65 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to estimate the effect of troubled assets, such as unpaid mortgages, on the bank's loan loss reserves and overall capitalization.

A bank with a large number of these types of assets may eventually be required to use capital to absorb losses, reducing its equity buffer. Many of those assets are also likely to be in non-accrual status and thus aren't earning interest for the bank, reducing earnings and elevating the risk of a future failure.

On Bankrate's asset quality test, State Bank of Bellingham scored 40 out of a possible 40 points, exceeding the national average of 37.49 points.

A helpful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, none of State Bank of Bellingham'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 maintain a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . Comparing the reserve's size to the total amount of problem loans can be a widely used indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on State Bank of Bellingham's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money has an effect on its safety and soundness. Earnings can be retained by the bank, giving a boost to its capital buffer, or be used to deal with problematic loans, likely making the bank better prepared to withstand financial shocks. Conversely, losses lessen a bank's ability to do those things.

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

One widely used measure of a bank's earnings is return on equity, or net income (profit, essentially) divided by total equity. State Bank of Bellingham's most recent annualized quarterly return on equity was 23.33 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $1.2 million on total equity of $5.6 million. The bank reported an annualized return on average assets, or ROA, of 2.45 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.