Safe and Sound

Park State Bank

Duluth, MN
5
Star Rating
Park State Bank is a Duluth, MN-based, FDIC-insured bank started in 1916. Regulatory filings show the bank having equity of $8.0 million on assets of $61.4 million, as of December 31, 2017.

U.S. bank customers have $52.9 million on deposit at 2 offices in MN run by 12 full-time employees. With that footprint, the bank has amassed loans and leases worth $48.4 million, including real estate loans of $39.6 million.

Overall, Bankrate believes that, as of December 31, 2017, Park State Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a breakdown of 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 is a key measurement of a bank's financial fortitude. It works as a bulwark against losses and affords protection for depositors when a bank is experiencing economic instability. From a safety and soundness perspective, more capital is better.

Park State Bank scored 16 out of a possible 30 points on our test to measure the adequacy of a bank's capital, better than the national average of 13.13.

A bank's Tier 1 capital ratio is an important measure of this buffer. Park State Bank's Tier 1 capital ratio was 19.43 percent, higher than 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 downturns.

Overall, Park State Bank held equity amounting to 12.97 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to determine the impact of problem assets, such as past-due mortgages, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

Having lots of these types of assets may eventually force a bank to use capital to cover losses, cutting down on its equity cushion. Many of those assets are also likely to be in non-accrual status and no longer earning money, resulting in reduced earnings and potentially more risk of a failure in the future.

On Bankrate's test of asset quality, Park State Bank scored 40 out of a possible 40 points, beating out 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, 0.12 percent of Park 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 maintain a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . That reserve's size can be a handy indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on Park 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 put them to work addressing problematic loans, potentially making the bank more resilient in tough times. Banks that are losing money, however, are less able to do those things.

On Bankrate's earnings test, Park State Bank scored 18 out of a possible 30, exceeding the national average of 15.12.

Return on equity, calculated by dividing net income (essentially, profit) by total equity, is one widely used measure of a bank's earnings. Park State Bank's most recent annualized quarterly return on equity was 9.42 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $704,000 on total equity of $8.0 million. 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.