Safe and Sound

Castle Rock Bank

Castle Rock, MN
5
Star Rating
Castle Rock, MN-based Castle Rock Bank is an FDIC-insured bank founded in 1916. The bank holds equity of $27.9 million on assets of $201.3 million, according to December 31, 2017, regulatory filings.

With 25 full-time employees in 2 offices in MN, the bank has amassed loans and leases worth $87.3 million, including real estate loans of $46.0 million. U.S. bank customers currently have $169.5 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Castle Rock Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for an analysis of how the bank did 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 acts as a buffer against losses and as protection for account holders during times of financial trouble for the bank. Therefore, a bank's level of capital is a key measurement of an institution's financial resilience. From a safety and soundness perspective, more capital is preferred.

On our test to measure the adequacy of a bank's capital, Castle Rock Bank achieved a score of 18 out of a possible 30 points, beating out the national average of 13.13.

A bank's Tier 1 capital ratio is a commonly used measure of this buffer. Castle Rock Bank's Tier 1 capital ratio was 26.16 percent, higher than the 6 percent level regulators consider adequate, and exceeding the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to financial downturns.

Overall, Castle Rock Bank held equity amounting to 13.84 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to estimate how the bank's loan loss reserves and overall capitalization could be affected by troubled assets, such as past-due loans.

Having large numbers of these types of assets may eventually require a bank to use capital to absorb losses, reducing its buffer of equity. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning money, resulting in reduced earnings and potentially more risk of a failure in the future.

Castle Rock Bank did better than the national average of 37.49 on Bankrate's test of asset quality, racking up 40 out of a possible 40 points .

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, 1.20 percent of Castle Rock Bank's loans were noncurrent -- in other words, 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 keep a reserve known as an "allowance for loan and lease losses" to deal with problem assets . The size of that reserve can be a useful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on Castle Rock Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability affects its safety and soundness. A bank can retain its earnings, expanding its capital buffer, or put them to work addressing problematic loans, potentially making the bank more resilient in tough times. However, banks that are losing money are less able to do those things.

Castle Rock Bank exceeded the national average on Bankrate's test of earnings, achieving a score of 18 out of a possible 30.

Return on equity, calculated by dividing net income (essentially, profit) by total equity, is one widely used measure of a bank's earnings. The most recent annualized quarterly return on equity for Castle Rock Bank was 9.07 percent, above the national average of 8.10 percent.

The bank reported net income of $2.5 million on total equity of $27.9 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 1.22 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.