Safe and Sound

Roundbank

Waseca, MN
5
Star Rating
Started in 1881, Roundbank is an FDIC-insured bank headquartered in Waseca, MN. The bank has equity of $32.4 million on assets of $304.4 million, according to December 31, 2017, regulatory filings.

U.S. bank customers have $246.2 million on deposit at 4 offices in MN run by 74 full-time employees. With that footprint, the bank has amassed loans and leases worth $227.5 million, including real estate loans of $165.6 million.

Overall, Bankrate believes that, as of December 31, 2017, Roundbank exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a breakdown of how the bank did on the three important criteria Bankrate used to score U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

Capital is a useful measurement of a bank's financial fortitude. It acts as a buffer against losses and provides protection for depositors during times of financial instability for the bank. When looking at safety and soundness, the more capital, the better.

Roundbank received a score of 12 out of a possible 30 points on our test to measure the adequacy of a bank's capital, lower than the national average of 13.13.

A bank's Tier 1 capital ratio is a commonly used measure of this buffer. Roundbank's Tier 1 capital ratio was 13.40 percent, exceeding the 6 percent level considered adequate by regulators, but less than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather financial challenges.

Overall, Roundbank held equity amounting to 10.66 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test is intended to try to understand how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by problem assets, such as unpaid mortgages.

A bank with a large number of these kinds of assets may eventually be forced to use capital to cover losses, diminishing its buffer of equity. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, resulting in reduced earnings and potentially more risk of a failure in the future.

Roundbank fell below the national average of 37.49 on Bankrate's asset quality test, racking up 36 out of a possible 40 points .

The percentage of problem assets a bank holds compared to its total assets is a handy indicator of asset quality.As of December 31, 2017, 0.93 percent of Roundbank'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 maintain a reserve known as an "allowance for loan and lease losses" to deal with problem assets . That reserve's size can be a widely used indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on Roundbank's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance has an effect on its long-term survivability. Earnings may be retained by the bank, expanding its capital cushion, or be used to address problematic loans, likely making the bank more resilient in tough times. Conversely, losses reduce a bank's ability to do those things.

Roundbank received above-average marks on Bankrate's test of earnings, achieving a score of 22 out of a possible 30.

Return on equity, calculated by dividing net income (essentially, profit) by total equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for Roundbank was 13.13 percent, above the national average of 8.10 percent.

The bank earned net income of $4.4 million on total equity of $32.4 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 1.44 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.