Safe and Sound

State Bank of Davis

Davis, IL
4
Star Rating
State Bank of Davis is a Davis, IL-based, FDIC-insured bank that opened its doors in 1928. Regulatory filings show the bank having equity of $16.2 million on $157.7 million in assets, as of December 31, 2017.

With 11 full-time employees, the bank has amassed loans and leases worth $102.6 million, including real estate loans of $72.3 million. U.S. bank customers currently have $125.5 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, State Bank of Davis exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for an analysis of how the bank fared on the three key criteria Bankrate used to grade U.S. 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. Therefore, when it comes to measuring an an institution's financial fortitude, capital is important. From a safety and soundness perspective, the more capital, the better.

State Bank of Davis 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 Davis's Tier 1 capital ratio was 12.88 percent, higher than the 6 percent level regulators consider adequate, 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 financial headwinds.

Overall, State Bank of Davis held equity amounting to 10.28 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 extensive holdings of these kinds of assets means a bank could eventually have to use capital to absorb losses, reducing its equity cushion. It also means that there are likely to be many assets that are in non-accrual status and no longer earning interest for the bank, resulting in diminished earnings and potentially more risk of a failure in the future.

State Bank of Davis scored 32 out of a possible 40 points on Bankrate's asset quality test, below the national average of 37.49.

A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 2.82 percent of State Bank of Davis's loans were noncurrent, meaning 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 to deal with problem assets known as an "allowance for loan and lease losses." The size of that reserve can be a handy indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on State Bank of Davis's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its long-term survivability. A bank can retain its earnings, increasing its capital cushion, or use them to deal with problematic loans, likely making the bank more resilient in tough times. Obviously, banks that are losing money are less able to do those things.

On Bankrate's test of earnings, State Bank of Davis 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 total equity. State Bank of Davis's most recent annualized quarterly return on equity was 12.19 percent, above the national average of 8.10 percent.

The bank reported net income of $1.9 million on total equity of $16.2 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 1.21 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.