Safe and Sound

Sterling Bank and Trust, FSB

Southfield, MI
5
Star Rating
Founded in 1984, Sterling Bank and Trust, FSB is an FDIC-insured bank headquartered in Southfield, MI. As of December 31, 2017, the bank held equity of $241.3 million on assets of $2.96 billion.

Thanks to the work of 308 full-time employees in 26 offices in multiple states, the bank currently holds loans and leases worth $2.71 billion, including $2.72 billion worth of real estate loans. U.S. bank customers currently have $2.37 billion in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Sterling Bank and Trust, FSB exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a breakdown of how the bank did on the three important criteria Bankrate used to grade U.S. banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial stability, capital is crucial. It acts as a cushion against losses and affords protection for depositors during periods of financial trouble for the bank. When it comes to safety and soundness, the higher the capital, the better.

On our test to measure capital adequacy, Sterling Bank and Trust, FSB received a score of 6 out of a possible 30 points, less than the national average of 13.13.

A bank's Tier 1 capital ratio is a widely followed measure of this buffer. Sterling Bank and Trust, FSB's Tier 1 capital ratio was 13.71 percent, exceeding the 6 percent level regulators consider adequate, but less than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to financial challenges.

Overall, Sterling Bank and Trust, FSB held equity amounting to 8.14 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test is intended to estimate how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by troubled assets, such as unpaid mortgages.

A bank with lots of these types of assets may eventually have to use capital to cover losses, diminishing 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, diminishing earnings and elevating the risk of a future failure.

On Bankrate's test of asset quality, Sterling Bank and Trust, FSB scored 40 out of a possible 40 points, exceeding 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, 0.03 percent of Sterling Bank and Trust, FSB's loans were noncurrent -- in other words, 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 handle problem assets known as an "allowance for loan and lease losses." How large that reserve is can be a handy indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problematic loans. Sterling Bank and Trust, FSB's loan loss allowance was 2,357.22 percent of its total noncurrent loans, above the national average. All else being equal, the higher the ratio of loan loss allowance to noncurrent loans, the better.

Earnings score

A bank's ability to earn money has an effect on its safety and soundness. A bank can retain its earnings, expanding its capital cushion, or use them to address problematic loans, potentially making the bank better prepared to withstand economic trouble. However, banks that are losing money are less able to do those things.

Sterling Bank and Trust, FSB did above-average on Bankrate's test of earnings, achieving a score of 26 out of a possible 30.

One key way to measure a bank's earnings is return on equity, calculated by dividing net income (profit, essentially) by total equity. Sterling Bank and Trust, FSB's most recent annualized quarterly return on equity was 19.02 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $40.7 million on total equity of $241.3 million. The bank had an annualized return on average assets, or ROA, of 1.64 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.