Safe and Sound

Traverse City State Bank

Traverse City, MI
4
Star Rating
Traverse City State Bank is an FDIC-insured bank started in 2000 and currently based in Traverse City, MI. The bank has equity of $36.6 million on assets of $336.9 million, according to December 31, 2017, regulatory filings.

Thanks to the efforts of 85 full-time employees in 5 offices in MI, the bank currently holds loans and leases worth $288.8 million, $215.0 million of which are for real estate. The bank currently holds $282.1 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, Traverse City State Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a look at how the bank fared on the three important criteria Bankrate used to grade U.S. banks.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

Capital acts as a bulwark against losses and affords protection for depositors when a bank is experiencing financial trouble. It follows then that when it comes to measuring an a bank's financial stability, capital is key. When it comes to safety and soundness, more capital is better.

Traverse City State Bank came in below the national average of 13.13 on our test to measure the adequacy of a bank's capital, scoring 10 out of a possible 30 points.

One widely followed measure of this buffer is a bank's Tier 1 capital ratio. Traverse City State Bank's Tier 1 capital ratio was 12.32 percent, exceeding the 6 percent level regulators consider adequate, but below the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather economic headwinds.

Overall, Traverse City State Bank held equity amounting to 10.87 percent of its assets, which was lower than 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 troubled assets, such as past-due loans.

A bank with extensive holdings of these types of assets may eventually have to use capital to cover losses, cutting down on its cushion of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, resulting in reduced earnings and potentially more risk of a future failure.

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

The percentage of problem assets a bank holds compared to its total assets is a widely used indicator of asset quality.As of December 31, 2017, 0.25 percent of Traverse City 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 known as an "allowance for loan and lease losses" to deal with problem assets . Comparing the reserve's size to the total amount of problematic loans can be a helpful indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Traverse City State Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance affects its long-term survivability. A bank can retain its earnings, boosting its capital buffer, or use them to deal with problematic loans, potentially making the bank more resilient in tough times. However, banks that are losing money are less able to do those things.

On Bankrate's test of earnings, Traverse City State Bank scored 18 out of a possible 30, above the national average of 15.12.

Return on equity, calculated by dividing net income (profit, basically) by the total amount of equity, is one important way to measure a bank's earnings. Traverse City State Bank's most recent annualized quarterly return on equity was 9.68 percent, above the national average of 8.10 percent.

The bank earned net income of $3.3 million on total equity of $36.6 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 1.01 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.