Safe and Sound

Security State Bank of Aitkin

Aitkin, MN
5
Star Rating
Security State Bank of Aitkin is an FDIC-insured bank started in 1947 and currently headquartered in Aitkin, MN. Regulatory filings show the bank having equity of $11.2 million on $98.3 million in assets, as of December 31, 2017.

U.S. bank customers have $86.2 million on deposit at 4 offices in MN run by 23 full-time employees. With that footprint, the bank holds loans and leases worth $54.7 million, including $38.1 million worth of real estate loans.

Overall, Bankrate believes that, as of December 31, 2017, Security State Bank of Aitkin exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a look at 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

When it comes to measuring an an institution's financial stability, capital is useful. It works as a buffer against losses and affords protection for depositors when a bank is experiencing economic instability. From a safety and soundness perspective, more capital is preferred.

On our test to measure capital adequacy, Security State Bank of Aitkin racked up 14 out of a possible 30 points, better than the national average of 13.13.

A bank's Tier 1 capital ratio is a widely followed measure of this buffer. Security State Bank of Aitkin's Tier 1 capital ratio was 17.74 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 stand up to financial difficulties.

Overall, Security State Bank of Aitkin held equity amounting to 11.44 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

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

Having lots of these types of assets suggests a bank could eventually have to use capital to absorb losses, decreasing its equity cushion. 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.

Security State Bank of Aitkin did better than the national average of 37.49 on Bankrate's test of asset quality, racking up 40 out of a possible 40 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, 0.62 percent of Security State Bank of Aitkin'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 problem assets . How large that reserve is can be a helpful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on Security State Bank of Aitkin's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability has an effect on its long-term survivability. A bank can retain its earnings, giving a boost to its capital buffer, or use them to address problematic loans, potentially making the bank more resilient in times of trouble. However, banks that are losing money are less able to do those things.

Security State Bank of Aitkin outperformed the average on Bankrate's test of earnings, achieving a score of 20 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 Security State Bank of Aitkin was 11.64 percent, above the national average of 8.10 percent.

The bank reported net income of $1.3 million on total equity of $11.2 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 1.34 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.