Safe and Sound

Summit State Bank

Santa Rosa, CA
4
Star Rating
Summit State Bank is a Santa Rosa, CA-based, FDIC-insured bank founded in 1982. As of December 31, 2017, the bank held equity of $59.7 million on assets of $610.9 million.

With 72 full-time employees in 5 offices in CA, the bank currently holds loans and leases worth $437.6 million, including real estate loans of $398.1 million. U.S. bank customers currently have $533.5 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Summit State Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a breakdown of how the bank did on the three major criteria Bankrate used to score U.S. banks.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital is a valuable measurement of a bank's financial fortitude. It acts as a cushion against losses and affords protection for depositors during times of economic trouble for the bank. When looking at safety and soundness, the higher the capital, the better.

Summit State Bank received a score of 10 out of a possible 30 points on our test to measure capital adequacy, falling short of the national average of 13.13.

A bank's Tier 1 capital ratio is an essential measure of this buffer. Summit State Bank's Tier 1 capital ratio was 11.58 percent, exceeding the 6 percent level considered adequate by regulators, but under the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather financial headwinds.

Overall, Summit State Bank held equity amounting to 9.77 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test is intended to try to understand how the bank's loan loss reserves and overall capitalization could be affected by troubled assets, such as unpaid mortgages.

A bank with large numbers of these kinds of assets may eventually be required to use capital to absorb losses, reducing its cushion of equity. Many of those assets are also likely to be in non-accrual status and no longer earning money, resulting in reduced earnings and potentially more risk of a failure in the future.

Summit State Bank scored 40 out of a possible 40 points on Bankrate's test of asset quality, better than the national average of 37.49.

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, 0.62 percent of Summit State Bank's loans were noncurrent, meaning 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 maintain a reserve to handle problem assets known as an "allowance for loan and lease losses." How large that reserve is can be a helpful 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 Summit State Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its safety and soundness. Earnings may be retained by the bank, increasing its capital cushion, or be used to deal with problematic loans, potentially making the bank better able to withstand economic trouble. Losses, on the other hand, lessen a bank's ability to do those things.

On Bankrate's test of earnings, Summit State Bank scored 12 out of a possible 30, lower than the national average of 15.12.

Return on equity, calculated by dividing net income (profit, basically) by the total amount of equity, is one key measure of a bank's earnings. Summit State Bank's most recent annualized quarterly return on equity was 5.51 percent, below the national average of 8.10 percent.

The bank earned net income of $3.3 million on total equity of $59.7 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 0.60 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.