Safe and Sound

Sterling Federal Bank, F.S.B.

Sterling, IL
3
Star Rating
Sterling, IL-based Sterling Federal Bank, F.S.B. is an FDIC-insured bank founded in 1885. As of December 31, 2017, the bank held equity of $49.7 million on $467.0 million in assets.

Thanks to the efforts of 100 full-time employees in 10 offices in multiple states, the bank currently holds loans and leases worth $202.6 million, $176.2 million of which are for real estate. U.S. bank customers currently have $365.0 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Sterling Federal Bank, F.S.B. exhibited a generally satisfactory condition, earning 3 out of 5 stars for safety and soundness. Keep reading for a breakdown of how the bank fared on the three important criteria Bankrate used to score American banks.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial fortitude, capital is essential. It works as a bulwark against losses and provides protection for accountholders when a bank is experiencing economic trouble. From a safety and soundness perspective, the more capital, the better.

Sterling Federal Bank, F.S.B. received a score of 10 out of a possible 30 points on our test to measure the adequacy of a bank's capital, less than the national average of 13.13.

One essential measure of this buffer is a bank's Tier 1 capital ratio. Sterling Federal Bank, F.S.B.'s Tier 1 capital ratio was 18.10 percent, higher than 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 weather economic downturns.

Overall, Sterling Federal Bank, F.S.B. held equity amounting to 10.64 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to estimate the impact of troubled assets, such as unpaid loans, on the bank's loan loss reserves and overall capitalization.

A bank with large numbers of these kinds of assets could eventually be forced to use capital to cover losses, diminishing its cushion of equity. 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, resulting in reduced earnings and potentially more risk of a failure in the future.

On Bankrate's test of asset quality, Sterling Federal Bank, F.S.B. scored 40 out of a possible 40 points, better than the national average of 37.49 points.

The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of December 31, 2017, 1.68 percent of Sterling Federal Bank, F.S.B.'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 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 troubled assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on Sterling Federal Bank, F.S.B.'s loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance has an effect on its long-term survivability. Earnings may be retained by the bank, increasing its capital cushion, or be used to address problematic loans, potentially making the bank better prepared to withstand financial shocks. Obviously, banks that are losing money are less able to do those things.

Sterling Federal Bank, F.S.B. did below-average on Bankrate's test of earnings, achieving a score of 0 out of a possible 30.

One key measure of a bank's earnings is return on equity, or net income (profit, basically) divided by total equity. The most recent annualized quarterly return on equity for Sterling Federal Bank, F.S.B. was -0.08 percent, below the national average of 8.10 percent.

The bank reported net income of $-41,000 on total equity of $49.7 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of -0.01 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.