Safe and Sound

The State Bank

Fenton, MI
5
Star Rating
Fenton, MI-based The State Bank is an FDIC-insured bank started in 1898. Regulatory filings show the bank having equity of $70.1 million on $781.3 million in assets, as of December 31, 2017.

U.S. bank customers have $673.2 million on deposit at 16 offices in MI run by 162 full-time employees. With that footprint, the bank currently holds loans and leases worth $671.0 million, $611.0 million of which are for real estate.

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

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial resilience, capital is useful. It acts as a buffer against losses and affords protection for depositors during periods of financial instability for the bank. When looking at safety and soundness, the more capital, the better.

The State Bank received a score of 8 out of a possible 30 points on our test to measure capital adequacy, below the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. The State Bank's Tier 1 capital ratio was 9.91 percent, above the 6 percent level considered adequate by regulators, but under the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather financial challenges.

Overall, The State Bank held equity amounting to 8.98 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to determine the impact of troubled assets, such as past-due mortgages, on the bank's loan loss reserves and overall capitalization.

Having lots of these kinds of assets suggests a bank could have to use capital to absorb losses, decreasing its cushion of equity. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, pushing down earnings and elevating the risk of a failure in the future.

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

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, 0.09 percent of The 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 maintain a reserve to deal with troubled assets known as an "allowance for loan and lease losses." That reserve's size can be a useful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on The State Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its long-term survivability. Earnings may be retained by the bank, increasing its capital buffer, or be used to deal with problematic loans, likely making the bank more resilient in tough times. However, banks that are losing money are less able to do those things.

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

One important way to measure a bank's earnings is return on equity, or net income (essentially profit) divided by total equity. The State Bank's most recent annualized quarterly return on equity was 14.61 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $9.6 million on total equity of $70.1 million. The bank reported an annualized return on average assets, or ROA, of 1.29 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.