Safe and Sound

Granite Falls Bank

Granite Falls, MN
5
Star Rating
Granite Falls, MN-based Granite Falls Bank is an FDIC-insured bank founded in 1878. The bank holds equity of $16.3 million on $156.3 million in assets, according to December 31, 2017, regulatory filings.

With 16 full-time employees, the bank has amassed loans and leases worth $74.5 million, including real estate loans of $28.5 million. U.S. bank customers currently have $104.5 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Granite Falls Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a look at how the bank did on the three major criteria Bankrate used to grade U.S. banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a bulwark against losses and affords protection for depositors when a bank is struggling financially. Therefore, a bank's level of capital is an important measurement of an institution's financial resilience. When it comes to safety and soundness, more capital is better.

Granite Falls Bank finished below the national average of 13.13 on our test to measure the adequacy of a bank's capital, scoring 12 out of a possible 30 points.

One essential measure of this buffer is a bank's Tier 1 capital ratio. Granite Falls Bank's Tier 1 capital ratio was 14.55 percent, exceeding the 6 percent level regulators consider adequate, but below the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to economic difficulties.

Overall, Granite Falls Bank held equity amounting to 10.41 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to determine the impact of problem assets, such as unpaid loans, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

Having a large number of these kinds of assets may eventually require a bank to use capital to absorb losses, diminishing its equity buffer. Many of those assets are also likely to be in non-accrual status and no longer earning money, resulting in diminished earnings and potentially more risk of a failure in the future.

On Bankrate's test of asset quality, Granite Falls Bank scored 40 out of a possible 40 points, above 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, 0.55 percent of Granite Falls 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 keep a reserve to deal with problem assets known as an "allowance for loan and lease losses." Comparing the reserve's size to the total amount of problem loans can be a useful indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Granite Falls Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its safety and soundness. A bank can retain its earnings, boosting its capital cushion, or put them to work addressing problematic loans, likely making the bank more resilient in times of trouble. Losses, on the other hand, take away from a bank's ability to do those things.

Granite Falls Bank received above-average marks on Bankrate's test of earnings, achieving a score of 24 out of a possible 30.

One widely used measure of a bank's earnings is return on equity, or net income (essentially profit) divided by total equity. Granite Falls Bank's most recent annualized quarterly return on equity was 15.26 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $2.5 million on total equity of $16.3 million. The bank experienced an annualized return on average assets, or ROA, of 1.62 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.