Safe and Sound

Adrian State Bank

Adrian, MN
5
Star Rating
Adrian State Bank is an FDIC-insured bank started in 1889 and currently headquartered in Adrian, MN. The bank has equity of $4.3 million on assets of $44.6 million, according to June 30, 2017, regulatory filings.

With 13 full-time employees, the bank has amassed loans and leases worth $35.8 million, including real estate loans of $14.8 million. U.S. bank customers currently have $38.7 million in deposits with the bank.

Overall, Bankrate believes that, as of June 30, 2017, Adrian State Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a look at how the bank faired on the three major criteria Bankrate used to score American banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a buffer against losses and as protection for accountholders when a bank is struggling financially. Therefore, when it comes to measuring an an institution's financial strength, capital is useful. When looking at safety and soundness, more capital is better.
Adrian State Bank received a score of 10 out of a possible 30 points on our test to measure the adequacy of a bank's capital, below the national average of 13.38.

One widely used measure of this buffer is a bank's Tier 1 capital ratio. Adrian State Bank's Tier 1 capital ratio was 11.26 percent, exceeding the 6 percent level considered adequate by regulators, but below the national average of 25.16 percent. A higher capital ratio suggests the bank will be better able to weather financial difficulties.

Overall, Adrian State Bank held equity amounting to 9.63 percent of its assets, which was lower than the national average of 12.10 percent.

Asset Quality Score

In this test, Bankrate tries to determine the effect of troubled assets, such as unpaid loans, on the bank's loan loss reserves and overall capitalization.

A bank with a large number of these kinds of assets could eventually have to use capital to absorb losses, diminishing its equity cushion. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning interest for the bank, diminishing earnings and elevating the chances of a failure in the future.

Adrian State Bank scored 40 out of a possible 40 points on Bankrate's test of asset quality, beating the national average of 37.62.

The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of June 30, 2017, 0.08 percent of Adrian 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 1.04 percent.

Banks keep a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . Comparing the how large that reserve is to the total amount of problem loans can be a useful indicator when evaluating a bank's ability to manage problem assets. Adrian State Bank's loan loss allowance was 1,096.55 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 buffer, or put them to work addressing problematic loans, likely making the bank better able to withstand economic trouble. Obviously, banks that are losing money have less ability to do those things.

Adrian State Bank scored 26 out of a possible 30 on Bankrate's earnings test, better than the national average of 16.52.

Return on equity, calculated by dividing net income (essentially, profit) by the total amount of equity, is one important way to measure a bank's earnings. Adrian State Bank's most recent annualized quarterly return on equity was 17.56 percent, above the national average of 9.28 percent.

The bank earned net income of $369,000 on total equity of $4.3 million for the twelve months ended June 30, 2017. The bank experienced an annualized return on average assets, or ROA, of 1.67 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above the average for U.S. banks of 1.14 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.