Safe and Sound

Sturgis Bank & Trust Company

Sturgis, MI
4
Star Rating
Sturgis Bank & Trust Company is a Sturgis, MI-based, FDIC-insured bank started in 1905. Regulatory filings show the bank having equity of $39.0 million on $414.2 million in assets, as of December 31, 2017.

With 123 full-time employees in 12 offices in MI, the bank currently holds loans and leases worth $281.7 million, including real estate loans of $240.9 million. U.S. bank customers currently have $337.2 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Sturgis Bank & Trust Company exhibited a good condition, earning 4 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 grade U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital is a useful measurement of a bank's financial resilience. It works as a buffer against losses and provides protection for depositors during times of economic instability for the bank. When looking at safety and soundness, more capital is better.

Sturgis Bank & Trust Company came in below the national average of 13.13 on our test to measure the adequacy of a bank's capital, achieving a score of 6 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Sturgis Bank & Trust Company's Tier 1 capital ratio was 12.55 percent, above the 6 percent level regulators consider adequate, but less than the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to financial headwinds.

Overall, Sturgis Bank & Trust Company held equity amounting to 9.42 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 effect of problem assets, such as past-due mortgages, on the bank's capitalization and allocated loan loss reserves.

Having lots of these kinds of assets could eventually force a bank to use capital to cover losses, decreasing its buffer of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning interest for the bank, pushing down earnings and elevating the risk of a future failure.

On Bankrate's test of asset quality, Sturgis Bank & Trust Company scored 40 out of a possible 40 points, above 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, 0.54 percent of Sturgis Bank & Trust Company'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 deal with problem assets known as an "allowance for loan and lease losses." Comparing how large that reserve is to the total amount of problematic loans can be a handy indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Sturgis Bank & Trust Company's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money affects its safety and soundness. A bank can retain its earnings, increasing its capital buffer, or put them to work addressing problematic loans, potentially making the bank better prepared to withstand financial shocks. Losses, on the other hand, lessen a bank's ability to do those things.

Sturgis Bank & Trust Company outperformed the average on Bankrate's test of earnings, achieving a score of 18 out of a possible 30.

One key measure of a bank's earnings is return on equity, calculated by dividing net income (profit, essentially) by total equity. The most recent annualized quarterly return on equity for Sturgis Bank & Trust Company was 9.03 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $3.4 million on total equity of $39.0 million. The bank had an annualized return on average assets, or ROA, of 0.84 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.