Safe and Sound

Security Bank Minnesota

Albert Lea, MN
5
Star Rating
Started in 1906, Security Bank Minnesota is an FDIC-insured bank headquartered in Albert Lea, MN. As of December 31, 2017, the bank had equity of $13.7 million on assets of $124.5 million.

U.S. bank customers have $108.0 million on deposit at 3 offices in MN run by 29 full-time employees. With that footprint, the bank holds loans and leases worth $99.5 million, including real estate loans of $28.1 million.

Overall, Bankrate believes that, as of December 31, 2017, Security Bank Minnesota 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 major criteria Bankrate used to grade American banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital is an essential measurement of an institution's financial resilience. It acts as a buffer against losses and provides protection for depositors when a bank is struggling financially. From a safety and soundness perspective, more capital is preferred.

On our test to measure the adequacy of a bank's capital, Security Bank Minnesota received a score of 12 out of a possible 30 points, failing to reach the national average of 13.13.

One commonly used measure of this buffer is a bank's Tier 1 capital ratio. Security Bank Minnesota's Tier 1 capital ratio was 11.81 percent, higher than the 6 percent level regulators consider adequate, but lower than the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather economic downturns.

Overall, Security Bank Minnesota held equity amounting to 11.02 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test is intended to estimate how the bank's loan loss reserves and overall capitalization could be affected by problem assets, such as unpaid mortgages.

Having extensive holdings of these kinds of assets suggests a bank could eventually have to use capital to cover losses, reducing its equity cushion. 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.

Security Bank Minnesota scored 40 out of a possible 40 points on Bankrate's test of asset quality, exceeding the national average of 37.49.

A helpful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.13 percent of Security Bank Minnesota'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 troubled assets . Comparing how large that reserve is to the total amount of at-risk loans can be a handy indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Security Bank Minnesota's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability affects its safety and soundness. Earnings may be retained by the bank, increasing its capital buffer, or be used to address problematic loans, likely making the bank more resilient in times of trouble. Banks that are losing money, however, are less able to do those things.

Security Bank Minnesota beat the national average on Bankrate's test of earnings, achieving a score of 30 out of a possible 30.

Return on equity, calculated by dividing net income (essentially, profit) by the total amount of equity, is one important measure of a bank's earnings. Security Bank Minnesota's most recent annualized quarterly return on equity was 22.49 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $3.0 million on total equity of $13.7 million. The bank reported an annualized return on average assets, or ROA, of 2.44 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.