Safe and Sound

State Bank of Cherry

Cherry, IL
5
Star Rating
State Bank of Cherry is a Cherry, IL-based, FDIC-insured bank founded in 1906. The bank holds equity of $11.3 million on $85.0 million in assets, according to December 31, 2017, regulatory filings.

Thanks to the efforts of 10 full-time employees, the bank has amassed loans and leases worth $50.1 million, including $31.2 million worth of real estate loans. The bank currently holds $73.6 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, State Bank of Cherry 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 important criteria Bankrate used to grade U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial resilience, capital is crucial. It acts 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 Cherry scored 18 out of a possible 30 points on our test to measure the adequacy of a bank's capital, exceeding the national average of 13.13.

A bank's Tier 1 capital ratio is an essential measure of this buffer. State Bank of Cherry's Tier 1 capital ratio was 21.62 percent, higher than the 6 percent level regulators consider adequate, but below the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather economic difficulties.

Overall, State Bank of Cherry held equity amounting to 13.34 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to estimate the impact of problem assets, such as past-due mortgages, on the bank's capitalization and allocated loan loss reserves.

Having a large number of these kinds of assets could eventually require a bank to use capital to cover losses, shrinking its cushion of equity. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, resulting in diminished earnings and potentially more risk of a future failure.

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

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, 0.03 percent of State Bank of Cherry'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 to deal with problem assets known as an "allowance for loan and lease losses." That reserve's size can be a widely used indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problematic loans. State Bank of Cherry's loan loss allowance was 2,947.06 percent of its total noncurrent loans, above the national average. All things being equal, the higher the ratio of loan loss allowance to noncurrent loans, the better.

Earnings score

How profitable a bank is affects its long-term survivability. A bank can retain its earnings, boosting its capital cushion, or put them to work addressing problematic loans, potentially making the bank more resilient in tough times. Losses, on the other hand, take away from a bank's ability to do those things.

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

Return on equity, calculated by dividing net income (profit, essentially) by total equity, is one important measure of a bank's earnings. State Bank of Cherry's most recent annualized quarterly return on equity was 10.53 percent, above the national average of 8.10 percent.

The bank recorded net income of $1.2 million on total equity of $11.3 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 1.38 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.