Safe and Sound

The Bath State Bank

Bath, IN
5
Star Rating
Bath, IN-based The Bath State Bank is an FDIC-insured bank founded in 1923. As of December 31, 2017, the bank held equity of $15.7 million on $151.1 million in assets.

U.S. bank customers have $123.0 million on deposit at 2 offices in IN run by 37 full-time employees. With that footprint, the bank has amassed loans and leases worth $106.9 million, including $70.3 million worth of real estate loans.

Overall, Bankrate believes that, as of December 31, 2017, The Bath State Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's an analysis of how the bank fared on the three important criteria Bankrate used to grade U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

Capital works as a cushion against losses and as protection for account holders during periods of economic trouble for the bank. Therefore, a bank's level of capital is an important measurement of an institution's financial fortitude. When it comes to safety and soundness, more capital is better.

On our test to measure the adequacy of a bank's capital, The Bath State Bank received a score of 10 out of a possible 30 points, below the national average of 13.13.

A bank's Tier 1 capital ratio is an essential measure of this buffer. The Bath State Bank's Tier 1 capital ratio was 15.35 percent, higher than the 6 percent level considered adequate by regulators, but less than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to financial headwinds.

Overall, The Bath State Bank held equity amounting to 10.41 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to estimate how the bank's capitalization and allocated loan loss reserves could be affected by problem assets, such as unpaid mortgages.

A bank with extensive holdings of these types of assets could eventually be forced 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 diminished earnings and potentially more risk of a failure in the future.

On Bankrate's test of asset quality, The Bath State Bank scored 40 out of a possible 40 points, beating the national average of 37.49 points.

A helpful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 1.40 percent of The Bath State Bank'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 to handle problem assets known as an "allowance for loan and lease losses." The size of that reserve can be a widely used indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on The Bath State Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its long-term survivability. A bank can retain its earnings, giving a boost to its capital cushion, or put them to work addressing problematic loans, potentially making the bank better able to withstand financial shocks. Banks that are losing money, however, have less ability to do those things.

The Bath State Bank scored 22 out of a possible 30 on Bankrate's earnings test, beating the national average of 15.12.

One important way to measure a bank's earnings is return on equity, calculated by dividing net income (profit, basically) by the total amount of equity. The Bath State Bank's most recent annualized quarterly return on equity was 12.65 percent, above the national average of 8.10 percent.

The bank recorded net income of $2.0 million on total equity of $15.7 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 1.31 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.