Safe and Sound

Perennial Bank

Darwin, MN
4
Star Rating
Founded in 1914, Perennial Bank is an FDIC-insured bank headquartered in Darwin, MN. Regulatory filings show the bank having equity of $8.6 million on assets of $107.1 million, as of December 31, 2017.

U.S. bank customers have $98.0 million on deposit at 4 offices in MN run by 24 full-time employees. With that footprint, the bank has amassed loans and leases worth $29.6 million, including $17.8 million worth of real estate loans.

Overall, Bankrate believes that, as of December 31, 2017, Perennial Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a look at how the bank did on the three key criteria Bankrate used to grade American banks.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

Capital acts as a cushion against losses and provides protection for account holders during times of financial instability for the bank. It follows then that a bank's level of capital is a key measurement of a bank's financial strength. When it comes to safety and soundness, the higher the capital, the better.

Perennial Bank fell below the national average of 13.13 on our test to measure the adequacy of a bank's capital, scoring 8 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Perennial Bank's Tier 1 capital ratio was 21.99 percent, above the 6 percent level considered adequate by regulators, but below 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, Perennial Bank held equity amounting to 8.03 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to estimate how the bank's loan loss reserves and overall capitalization could be affected by troubled assets, such as past-due mortgages.

A bank with large numbers of these types of assets could eventually be forced to use capital to absorb losses, shrinking its equity buffer. Many of those assets are also likely to be in non-accrual status and thus aren't earning interest for the bank, resulting in lower earnings and potentially more risk of a future failure.

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

The percentage of problem assets a bank holds compared to its total assets is a useful indicator of asset quality.As of December 31, 2017, 0.13 percent of Perennial 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 handle troubled assets known as an "allowance for loan and lease losses." Comparing how large that reserve is to the total amount of at-risk loans can be a widely used indicator when evaluating a bank's ability to manage troubled assets. Perennial Bank's loan loss allowance was 1,335.00 percent of its total noncurrent loans, above the national average. All else being equal, a higher ratio of loan loss allowance to noncurrent loans is better.

Earnings score

A bank's earnings performance has an effect on its long-term survivability. A bank can retain its earnings, boosting its capital cushion, or put them to work addressing problematic loans, likely making the bank better able to withstand economic trouble. Conversely, losses lessen a bank's ability to do those things.

Perennial Bank scored 20 out of a possible 30 on Bankrate's test of earnings, beating out the national average of 15.12.

One widely used way to measure a bank's earnings is return on equity, calculated by dividing net income (profit, basically) by the total amount of equity. Perennial Bank's most recent annualized quarterly return on equity was 10.61 percent, above the national average of 8.10 percent.

The bank reported net income of $910,000 on total equity of $8.6 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 0.90 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.