Safe and Sound

Community Bank Mankato

Vernon Center, MN
4
Star Rating
Community Bank Mankato is a Vernon Center, MN-based, FDIC-insured bank started in 1929. The bank has equity of $23.1 million on assets of $288.4 million, according to December 31, 2017, regulatory filings.

U.S. bank customers have $255.3 million on deposit at 4 offices in MN run by 58 full-time employees. With that footprint, the bank has amassed loans and leases worth $255.6 million, including $211.0 million worth of real estate loans.

Overall, Bankrate believes that, as of December 31, 2017, Community Bank Mankato exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a breakdown of how the bank did on the three major criteria Bankrate used to grade American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital is a key measurement of an institution's financial strength. It works as a bulwark against losses and as protection for depositors during periods of economic instability for the bank. When looking at safety and soundness, more capital is preferred.

Community Bank Mankato came in below the national average of 13.13 on our test to measure capital adequacy, receiving a score of 6 out of a possible 30 points.

A bank's Tier 1 capital ratio is a commonly used measure of this buffer. Community Bank Mankato's Tier 1 capital ratio was 9.76 percent, exceeding the 6 percent level considered adequate by regulators, but less than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather economic difficulties.

Overall, Community Bank Mankato held equity amounting to 8.02 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to estimate the effect of problem assets, such as past-due mortgages, on the bank's loan loss reserves and overall capitalization.

Having a large number of these types of assets suggests a bank may have to use capital to cover losses, cutting down on 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 money, decreasing earnings and increasing the risk of a future failure.

On Bankrate's test of asset quality, Community Bank Mankato scored 36 out of a possible 40 points, falling short of the national average of 37.49 points.

A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.96 percent of Community Bank Mankato'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." Comparing how large that reserve is to the total amount of at-risk loans can be a useful indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Community Bank Mankato's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its long-term survivability. A bank can retain its earnings, boosting its capital buffer, or put them to work addressing problematic loans, potentially making the bank more resilient in times of trouble. Conversely, losses reduce a bank's ability to do those things.

Community Bank Mankato exceeded the national average on Bankrate's earnings test, achieving a score of 26 out of a possible 30.

Return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity, is one key measure of a bank's earnings. The most recent annualized quarterly return on equity for Community Bank Mankato was 18.07 percent, above the national average of 8.10 percent.

The bank reported net income of $4.0 million on total equity of $23.1 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 1.45 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.