Safe and Sound

State Bank of Chandler

Chandler, MN
5
Star Rating
State Bank of Chandler is a Chandler, MN-based, FDIC-insured bank started in 1902. As of December 31, 2017, the bank held equity of $5.6 million on $47.0 million in assets.

With 10 full-time employees, the bank currently holds loans and leases worth $31.6 million, including real estate loans of $10.4 million. U.S. bank customers currently have $40.5 million in deposits with the bank.

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

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a buffer against losses and as protection for depositors when a bank is struggling financially. It follows then that a bank's level of capital is a key measurement of an institution's financial strength. When looking at safety and soundness, the higher the capital, the better.

State Bank of Chandler scored 14 out of a possible 30 points on our test to measure capital adequacy, exceeding the national average of 13.13.

A bank's Tier 1 capital ratio is a commonly used measure of this buffer. State Bank of Chandler's Tier 1 capital ratio was 16.31 percent, above the 6 percent level regulators consider adequate, 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 financial difficulties.

Overall, State Bank of Chandler held equity amounting to 11.83 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test is intended to try to understand how the bank's capitalization and allocated loan loss reserves could be affected by problem assets, such as past-due mortgages.

Having extensive holdings of these kinds of assets may eventually force a bank to use capital to cover losses, reducing its cushion of equity. 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.

On Bankrate's asset quality test, State Bank of Chandler scored 40 out of a possible 40 points, above 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, 0.83 percent of State Bank of Chandler'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 troubled assets known as an "allowance for loan and lease losses." That reserve's size can be a handy indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on State Bank of Chandler'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, increasing its capital buffer, or be used to deal with problematic loans, likely making the bank more resilient in times of trouble. Obviously, banks that are losing money have less ability to do those things.

State Bank of Chandler exceeded the national average on Bankrate's test of earnings, achieving a score of 16 out of a possible 30.

One widely used measure of a bank's earnings is return on equity, calculated by dividing net income (profit, basically) by the total amount of equity. State Bank of Chandler's most recent annualized quarterly return on equity was 8.17 percent, above the national average of 8.10 percent.

The bank reported net income of $439,000 on total equity of $5.6 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 0.97 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.