Safe and Sound

KleinBank

Big Lake, MN
5
Star Rating
Chaska, MN-based KleinBank is an FDIC-insured bank founded in 1925. The bank holds equity of $202.3 million on $2.01 billion in assets, according to December 31, 2017, regulatory filings.

With 371 full-time employees in 23 offices in MN, the bank has amassed loans and leases worth $1.09 billion, including real estate loans of $712.0 million. U.S. bank customers currently have $1.71 billion in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, KleinBank 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 key criteria Bankrate used to grade U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital is a crucial measurement of a bank's financial fortitude. It acts as a cushion against losses and affords protection for depositors when a bank is experiencing economic trouble. When looking at safety and soundness, more capital is better.

KleinBank received a score of 8 out of a possible 30 points on our test to measure the adequacy of a bank's capital, less than the national average of 13.13.

One widely followed measure of this buffer is a bank's Tier 1 capital ratio. KleinBank's Tier 1 capital ratio was 12.27 percent, above the 6 percent level regulators consider adequate, but under the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to economic challenges.

Overall, KleinBank held equity amounting to 10.08 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 troubled assets, such as past-due loans, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

Having lots of these types of assets means a bank may eventually have to use capital to absorb losses, shrinking its equity cushion. It also means that there are likely to be many assets that are in non-accrual status and no longer earning interest for the bank, resulting in depressed earnings and potentially more risk of a future failure.

KleinBank did better than the national average of 37.49 on Bankrate's asset quality test, 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, 0.78 percent of KleinBank'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 problem assets . 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 KleinBank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its long-term survivability. Earnings can be retained by the bank, boosting its capital cushion, or be used to deal with problematic loans, likely making the bank more resilient in tough times. Conversely, losses lessen a bank's ability to do those things.

KleinBank scored 22 out of a possible 30 on Bankrate's test of earnings, beating the national average of 15.12.

One widely used measure of a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by total equity. The most recent annualized quarterly return on equity for KleinBank was 13.19 percent, above the national average of 8.10 percent.

The bank recorded net income of $26.5 million on total equity of $202.3 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 1.36 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.