Safe and Sound

The State Bank of Bern

Bern, KS
5
Star Rating
Bern, KS-based The State Bank of Bern is an FDIC-insured bank started in 1889. Regulatory filings show the bank having equity of $14.3 million on $95.5 million in assets, as of December 31, 2017.

With 13 full-time employees in 2 offices in KS, the bank currently holds loans and leases worth $47.5 million, including real estate loans of $12.6 million. U.S. bank customers currently have $80.8 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, The State Bank of Bern 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 key criteria Bankrate used to score U.S. banks on safety and soundness.

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SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a buffer against losses and affords protection for account holders during periods of financial instability for the bank. Therefore, when it comes to measuring an an institution's financial strength, capital is valuable. From a safety and soundness perspective, the higher the capital, the better.

On our test to measure the adequacy of a bank's capital, The State Bank of Bern scored 20 out of a possible 30 points, beating out the national average of 13.13.

A bank's Tier 1 capital ratio is an essential measure of this buffer. The State Bank of Bern's Tier 1 capital ratio was 21.24 percent, exceeding the 6 percent level considered adequate by regulators, but lower than the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather financial challenges.

Overall, The State Bank of Bern held equity amounting to 14.94 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

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

A bank with lots of these kinds of assets could eventually be forced to use capital to cover losses, cutting down on 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 increasing the chances of a failure in the future.

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

A handy indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 1.17 percent of The State Bank of Bern'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 deal with troubled assets known as an "allowance for loan and lease losses." The size of that reserve 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 The State Bank of Bern's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its safety and soundness. A bank can retain its earnings, expanding its capital buffer, or put them to work addressing problematic loans, likely making the bank better prepared to withstand financial shocks. Conversely, losses diminish a bank's ability to do those things.

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

Return on equity, calculated by dividing net income (essentially, profit) by total equity, is one important measure of a bank's earnings. The State Bank of Bern's most recent annualized quarterly return on equity was 7.14 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $1.0 million on total equity of $14.3 million. The bank had an annualized return on average assets, or ROA, of 1.07 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.