Safe and Sound

21st Century Bank

Loretto, MN
3
Star Rating
Loretto, MN-based 21st Century Bank is an FDIC-insured bank started in 1917. The bank has equity of $52.9 million on $436.3 million in assets, according to December 31, 2017, regulatory filings.

Thanks to the efforts of 60 full-time employees in 7 offices in MN, the bank currently holds loans and leases worth $337.4 million, $267.8 million of which are for real estate. The bank currently holds $382.1 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, 21st Century Bank exhibited a generally satisfactory condition, earning 3 out of 5 stars for safety and soundness. Keep reading for a breakdown of how the bank fared on the three major criteria Bankrate used to evaluate American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital is a useful measurement of a bank's financial fortitude. It acts as a bulwark against losses and provides protection for accountholders during periods of financial instability for the bank. From a safety and soundness perspective, more capital is better.

21st Century Bank exceeded the national average of 13.13 points on our test to measure the adequacy of a bank's capital, receiving a score of 16 out of a possible 30 points.

One commonly used measure of this buffer is a bank's Tier 1 capital ratio. 21st Century Bank's Tier 1 capital ratio was 17.52 percent, higher than the 6 percent level regulators consider adequate, but below the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to financial headwinds.

Overall, 21st Century Bank held equity amounting to 12.13 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 reserves set aside to cover loan losses, as well as overall capitalization, could be affected by troubled assets, such as unpaid loans.

Having extensive holdings of these types of assets means a bank could eventually have to use capital to cover 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 interest for the bank, reducing earnings and elevating the chances of a future failure.

21st Century Bank scored below the national average of 37.49 on Bankrate's asset quality test, racking up 28 out of a possible 40 points .

The percentage of problem assets a bank holds compared to its total assets is a handy indicator of asset quality.As of December 31, 2017, 0.73 percent of 21st Century Bank's loans were noncurrent, meaning 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 known as an "allowance for loan and lease losses" to deal with problem assets . Comparing the size of that reserve to the total amount of problem loans can be a helpful indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on 21st Century Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money has an effect on its long-term survivability. Earnings may be retained by the bank, increasing its capital cushion, or be used to deal with problematic loans, potentially making the bank better able to withstand financial trouble. Losses, on the other hand, take away from a bank's ability to do those things.

21st Century Bank scored 10 out of a possible 30 on Bankrate's earnings test, lower than the national average of 15.12.

One key measure of a bank's earnings is return on equity, calculated by dividing net income (profit, basically) by total equity. The most recent annualized quarterly return on equity for 21st Century Bank was 4.54 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $2.3 million on total equity of $52.9 million. The bank reported an annualized return on average assets, or ROA, of 0.57 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below 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.