Safe and Sound

State Bank of Taunton

Taunton, MN
2
Star Rating
State Bank of Taunton is a Taunton, MN-based, FDIC-insured bank dating back to 1905. As of December 31, 2017, the bank had equity of $4.8 million on $48.7 million in assets.

Thanks to the efforts of 10 full-time employees, the bank holds loans and leases worth $33.7 million, including $23.0 million worth of real estate loans. U.S. bank customers currently have $42.7 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, State Bank of Taunton exhibited a below-average condition, earning 2 out of 5 stars for safety and soundness. Here's an analysis of how the bank fared on the three major criteria Bankrate used to score U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial strength, capital is key. It works as a bulwark against losses and as protection for accountholders when a bank is struggling financially. When looking at safety and soundness, the higher the capital, the better.

On our test to measure the adequacy of a bank's capital, State Bank of Taunton received a score of 10 out of a possible 30 points, falling short of 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 Taunton's Tier 1 capital ratio was 12.91 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 stand up to financial downturns.

Overall, State Bank of Taunton held equity amounting to 9.83 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to estimate the impact of troubled assets, such as past-due loans, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

Having extensive holdings of these kinds of assets could eventually force a bank to use capital to absorb losses, cutting down on 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 depressed earnings and potentially more risk of a future failure.

State Bank of Taunton fell short of the national average of 37.49 on Bankrate's asset quality test, racking up 20 out of a possible 40 points .

The percentage of problem assets a bank holds compared to its total assets is a widely used indicator of asset quality.As of December 31, 2017, 2.09 percent of State Bank of Taunton'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 maintain a reserve known as an "allowance for loan and lease losses" to deal with problem assets . That reserve's size can be a helpful 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 Taunton's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its long-term survivability. Earnings can be retained by the bank, increasing its capital buffer, or be used to address problematic loans, likely making the bank better prepared to withstand financial shocks. Losses, on the other hand, take away from a bank's ability to do those things.

State Bank of Taunton scored 14 out of a possible 30 on Bankrate's earnings test, below the national average of 15.12.

Return on equity, calculated by dividing net income (profit, basically) by the total amount of equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for State Bank of Taunton was 7.15 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $325,000 on total equity of $4.8 million. The bank experienced an annualized return on average assets, or ROA, of 0.66 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.