Safe and Sound

State Bank of Danvers

Benson, MN
5
Star Rating
Benson, MN-based State Bank of Danvers is an FDIC-insured bank started in 1902. As of December 31, 2017, the bank had equity of $5.3 million on assets of $48.8 million.

Thanks to the efforts of 7 full-time employees, the bank holds loans and leases worth $22.4 million, including real estate loans of $8.1 million. The bank currently holds $42.2 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, State Bank of Danvers exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a breakdown of how the bank fared on the three major criteria Bankrate used to grade American banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a bulwark against losses and affords protection for account holders when a bank is struggling financially. Therefore, a bank's level of capital is an important measurement of a bank's financial resilience. When looking at safety and soundness, the more capital, the better.

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

One essential measure of this buffer is a bank's Tier 1 capital ratio. State Bank of Danvers's Tier 1 capital ratio was 18.61 percent, higher than the 6 percent level considered adequate by regulators, but below the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather financial headwinds.

Overall, State Bank of Danvers held equity amounting to 10.96 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 problem assets, such as unpaid mortgages, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

Having large numbers of these kinds of assets may eventually force a bank 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, decreasing earnings and elevating the chances of a future failure.

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

A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 1.25 percent of State Bank of Danvers'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 . That reserve's size can be a handy indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on State Bank of Danvers's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money affects its safety and soundness. Earnings may be retained by the bank, boosting its capital buffer, or be used to address problematic loans, likely making the bank better able to withstand financial shocks. Obviously, banks that are losing money have less ability to do those things.

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

One important way to measure a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by total equity. The most recent annualized quarterly return on equity for State Bank of Danvers was 11.03 percent, above the national average of 8.10 percent.

The bank earned net income of $581,000 on total equity of $5.3 million for the twelve months ended December 31, 2017. The bank experienced 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.