Safe and Sound

The Port Austin State Bank

Port Austin, MI
5
Star Rating
Port Austin, MI-based The Port Austin State Bank is an FDIC-insured bank started in 1884. The bank has equity of $9.0 million on assets of $51.2 million, according to December 31, 2017, regulatory filings.

With 8 full-time employees, the bank currently holds loans and leases worth $38.8 million, including real estate loans of $32.5 million. U.S. bank customers currently have $41.5 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, The Port Austin State Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a look at how the bank did on the three important criteria Bankrate used to evaluate U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a buffer against losses and as protection for depositors when a bank is struggling financially. It follows then that when it comes to measuring an an institution's financial strength, capital is valuable. When looking at safety and soundness, the more capital, the better.

On our test to measure the adequacy of a bank's capital, The Port Austin State Bank scored 26 out of a possible 30 points, exceeding the national average of 13.13.

One essential measure of this buffer is a bank's Tier 1 capital ratio. The Port Austin State Bank's Tier 1 capital ratio was 27.27 percent, exceeding the 6 percent level considered adequate by regulators, and above the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather financial downturns.

Overall, The Port Austin State Bank held equity amounting to 17.58 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test is intended to estimate how the bank's capitalization and allocated loan loss reserves could be affected by troubled assets, such as past-due mortgages.

Having large numbers of these types of assets means a bank could eventually have to use capital to cover losses, reducing its buffer of equity. 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, resulting in reduced earnings and potentially more risk of a failure in the future.

The Port Austin State Bank scored 40 out of a possible 40 points on Bankrate's test of asset quality, above the national average of 37.49.

A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.01 percent of The Port Austin State Bank'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 troubled assets known as an "allowance for loan and lease losses." Comparing the reserve's size to the total amount of at-risk loans can be a useful indicator when evaluating a bank's ability to manage troubled assets. The Port Austin State Bank's loan loss allowance was 13,850.00 percent of its total noncurrent loans, higher than the national average. All else being equal, the higher the ratio of loan loss allowance to noncurrent loans, the better.

Earnings score

How profitable a bank is affects its safety and soundness. A bank can retain its earnings, boosting its capital cushion, or use them to deal with problematic loans, likely making the bank more resilient in times of trouble. Losses, on the other hand, diminish a bank's ability to do those things.

On Bankrate's earnings test, The Port Austin State Bank scored 16 out of a possible 30, beating out the national average of 15.12.

Return on equity, calculated by dividing net income (essentially, profit) by total equity, is one important way to measure a bank's earnings. The Port Austin State Bank's most recent annualized quarterly return on equity was 7.37 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $657,000 on total equity of $9.0 million. The bank experienced an annualized return on average assets, or ROA, of 1.28 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.