Safe and Sound

Grinnell State Bank

Grinnell, IA
5
Star Rating
Grinnell State Bank is a Grinnell, IA-based, FDIC-insured bank founded in 1925. The bank has equity of $36.6 million on $310.3 million in assets, according to December 31, 2017, regulatory filings.

Thanks to the efforts of 50 full-time employees in 4 offices in IA, the bank has amassed loans and leases worth $223.4 million, including $170.5 million worth of real estate loans. U.S. bank customers currently have $245.6 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Grinnell State Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a look at how the bank fared on the three important criteria Bankrate used to evaluate U.S. banks on safety and soundness.

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SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a cushion against losses and affords protection for account holders during periods of financial instability for the bank. Therefore, a bank's level of capital is a key measurement of an institution's financial strength. When looking at safety and soundness, the more capital, the better.

On our test to measure capital adequacy, Grinnell State Bank racked up 14 out of a possible 30 points, beating out the national average of 13.13.

A bank's Tier 1 capital ratio is an important measure of this buffer. Grinnell State Bank's Tier 1 capital ratio was 14.30 percent, exceeding the 6 percent level considered adequate by regulators, but lower than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather financial headwinds.

Overall, Grinnell State Bank held equity amounting to 11.80 percent of its assets, which was lower than 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 past-due mortgages.

Having extensive holdings of these kinds of assets means a bank may have to use capital to cover losses, shrinking its cushion of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, pushing down earnings and elevating the risk of a future failure.

On Bankrate's asset quality test, Grinnell State Bank scored 40 out of a possible 40 points, beating the national average of 37.49 points.

A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.17 percent of Grinnell State Bank'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 keep a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . Comparing how large that reserve is to the total amount of problematic loans can be a handy indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Grinnell State Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its long-term survivability. A bank can retain its earnings, boosting its capital cushion, or use them to address problematic loans, likely making the bank better prepared to withstand economic trouble. Obviously, banks that are losing money are less able to do those things.

Grinnell State 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 the total amount of equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for Grinnell State Bank was 9.04 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $3.2 million on total equity of $36.6 million. The bank had an annualized return on average assets, or ROA, of 1.04 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.