Safe and Sound

Security State Bank of Fergus Falls

Fergus Falls, MN
4
Star Rating
Security State Bank of Fergus Falls is a Fergus Falls, MN-based, FDIC-insured bank started in 1957. Regulatory filings show the bank having equity of $12.3 million on assets of $123.6 million, as of December 31, 2017.

With 25 full-time employees, the bank holds loans and leases worth $88.3 million, including real estate loans of $49.0 million. U.S. bank customers currently have $103.0 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Security State Bank of Fergus Falls exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's an analysis of how the bank did on the three important criteria Bankrate used to evaluate U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a bulwark against losses and provides protection for depositors during periods of economic instability for the bank. It follows then that a bank's level of capital is a crucial measurement of a bank's financial resilience. When it comes to safety and soundness, the higher the capital, the better.

On our test to measure the adequacy of a bank's capital, Security State Bank of Fergus Falls received a score of 10 out of a possible 30 points, less than the national average of 13.13.

One widely followed measure of this buffer is a bank's Tier 1 capital ratio. Security State Bank of Fergus Falls's Tier 1 capital ratio was 11.46 percent, higher than the 6 percent level regulators consider adequate, but below the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather financial difficulties.

Overall, Security State Bank of Fergus Falls held equity amounting to 9.99 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 reserves set aside to cover loan losses, as well as overall capitalization, could be affected by problem assets, such as past-due loans.

A bank with a large number of these kinds of assets may eventually be required to use capital to cover losses, shrinking its cushion of equity. Many of those assets are also likely to be in non-accrual status and no longer earning money, reducing earnings and increasing the risk of a future failure.

Security State Bank of Fergus Falls scored 36 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 helpful indicator of asset quality.As of December 31, 2017, 2.80 percent of Security State Bank of Fergus Falls'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 handle troubled assets known as an "allowance for loan and lease losses." Comparing the reserve's size to the total amount of problem 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 State Bank of Fergus Falls's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance has an effect on its long-term survivability. A bank can retain its earnings, increasing its capital cushion, or use them to address problematic loans, likely making the bank better able to withstand economic trouble. However, banks that are losing money are less able to do those things.

On Bankrate's earnings test, Security State Bank of Fergus Falls scored 18 out of a possible 30, above the national average of 15.12.

One key measure of a bank's earnings is return on equity, calculated by dividing net income (profit, essentially) by total equity. The most recent annualized quarterly return on equity for Security State Bank of Fergus Falls was 8.94 percent, above the national average of 8.10 percent.

The bank reported net income of $1.1 million on total equity of $12.3 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.93 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.