Safe and Sound

State Bank of Easton

Easton, MN
4
Star Rating
State Bank of Easton is an Easton, MN-based, FDIC-insured bank founded in 1934. The bank has equity of $2.7 million on $21.4 million in assets, according to December 31, 2017, regulatory filings.

Thanks to the efforts of 5 full-time employees, the bank currently holds loans and leases worth $13.9 million, $6.8 million of which are for real estate. The bank currently holds $15.6 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, State Bank of Easton 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 important criteria Bankrate used to grade American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a buffer against losses and affords protection for account holders when a bank is struggling financially. Therefore, a bank's level of capital is an essential measurement of a bank's financial fortitude. From a safety and soundness perspective, more capital is better.

On our test to measure capital adequacy, State Bank of Easton scored 16 out of a possible 30 points, better than the national average of 13.13.

One essential measure of this buffer is a bank's Tier 1 capital ratio. State Bank of Easton's Tier 1 capital ratio was 16.98 percent, higher than the 6 percent level considered adequate by regulators, but lower than the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to economic headwinds.

Overall, State Bank of Easton held equity amounting to 12.51 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to estimate how the bank's capitalization and allocated loan loss reserves could be affected by troubled assets, such as past-due loans.

A bank with large numbers of these types of assets may eventually be required to use capital to absorb losses, cutting down on its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning interest for the bank, diminishing earnings and elevating the risk of a failure in the future.

On Bankrate's asset quality test, State Bank of Easton scored 36 out of a possible 40 points, failing to reach the national average of 37.49 points.

The percentage of problem assets a bank holds compared to its total assets is a handy indicator of asset quality.As of December 31, 2017, 1.89 percent of State Bank of Easton'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 to handle troubled 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 problem assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on State Bank of Easton's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability affects its long-term survivability. A bank can retain its earnings, expanding its capital buffer, or put them to work addressing problematic loans, likely making the bank more resilient in times of trouble. Obviously, banks that are losing money are less able to do those things.

On Bankrate's test of earnings, State Bank of Easton scored 14 out of a possible 30, coming in below the national average of 15.12.

Return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity, is one widely used measure of a bank's earnings. State Bank of Easton's most recent annualized quarterly return on equity was 6.24 percent, below the national average of 8.10 percent.

The bank earned net income of $166,000 on total equity of $2.7 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.80 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.