Safe and Sound

Community Bank Owatonna

Owatonna, MN
4
Star Rating
Community Bank Owatonna is an FDIC-insured bank started in 2003 and currently based in Owatonna, MN. The bank holds equity of $5.1 million on assets of $55.5 million, according to December 31, 2017, regulatory filings.

Thanks to the work of 9 full-time employees, the bank has amassed loans and leases worth $35.1 million, $26.1 million of which are for real estate. The bank currently holds $49.6 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, Community Bank Owatonna exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for an analysis of how the bank fared on the three major criteria Bankrate used to grade American banks.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial resilience, capital is valuable. It acts as a cushion against losses and as protection for depositors during times of economic trouble for the bank. From a safety and soundness perspective, the higher the capital, the better.

Community Bank Owatonna came in below the national average of 13.13 on our test to measure the adequacy of a bank's capital, racking up 10 out of a possible 30 points.

One widely used measure of this buffer is a bank's Tier 1 capital ratio. Community Bank Owatonna's Tier 1 capital ratio was 13.22 percent, exceeding the 6 percent level regulators consider adequate, but lower 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 Owatonna held equity amounting to 9.20 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to determine the impact of troubled assets, such as past-due mortgages, on the bank's capitalization and allocated loan loss reserves.

A bank with large numbers of these types of assets could eventually be forced to use capital to cover losses, diminishing its cushion of equity. Many of those assets are also likely to be 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 Owatonna scored 40 out of a possible 40 points, exceeding the national average of 37.49 points.

The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of December 31, 2017, none of Community Bank Owatonna'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 troubled assets . That reserve's size can be a widely used indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on Community Bank Owatonna'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 buffer, or be used to deal with problematic loans, likely making the bank more resilient in tough times. However, banks that are losing money have less ability to do those things.

Community Bank Owatonna scored 8 out of a possible 30 on Bankrate's test of earnings, falling short of the national average of 15.12.

Return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity, is one widely used measure of a bank's earnings. Community Bank Owatonna's most recent annualized quarterly return on equity was 2.98 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $158,000 on total equity of $5.1 million. The bank experienced an annualized return on average assets, or ROA, of 0.30 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.