Safe and Sound

Randall State Bank

Randall, MN
5
Star Rating
Randall, MN-based Randall State Bank is an FDIC-insured bank started in 1908. As of December 31, 2017, the bank had equity of $5.0 million on $41.5 million in assets.

With 13 full-time employees in 2 offices in MN, the bank holds loans and leases worth $34.5 million, including real estate loans of $29.4 million. U.S. bank customers currently have $35.9 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Randall 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 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 works as a cushion against losses and affords protection for account holders when a bank is struggling financially. Therefore, a bank's level of capital is an essential measurement of an institution's financial resilience. From a safety and soundness perspective, more capital is better.

Randall State Bank racked up 16 out of a possible 30 points on our test to measure capital adequacy, exceeding the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Randall State Bank's Tier 1 capital ratio was 14.78 percent, above the 6 percent level regulators consider adequate, but less than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to financial downturns.

Overall, Randall State Bank held equity amounting to 12.12 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to estimate the effect 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 force a bank to use capital to absorb losses, reducing its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning money, decreasing earnings and increasing the risk of a future failure.

Randall State Bank scored 32 out of a possible 40 points on Bankrate's asset quality test, coming in below the national average of 37.49.

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, 1.40 percent of Randall 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 above the national average of 1.01 percent.

Banks maintain a reserve to deal with troubled assets known as an "allowance for loan and lease losses." The size of that reserve can be a useful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on Randall State Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its long-term survivability. Earnings can be retained by the bank, expanding its capital cushion, or be used to deal with problematic loans, likely making the bank better able to withstand economic trouble. Conversely, losses diminish a bank's ability to do those things.

Randall State Bank exceeded the national average on Bankrate's earnings test, achieving a score of 26 out of a possible 30.

One important measure of a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by the total amount of equity. Randall State Bank's most recent annualized quarterly return on equity was 16.86 percent, above the national average of 8.10 percent.

The bank recorded net income of $820,000 on total equity of $5.0 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 2.06 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.