Safe and Sound

Security State Bank of Hibbing

Hibbing, MN
4
Star Rating
Security State Bank of Hibbing is an FDIC-insured bank started in 1911 and currently headquartered in Hibbing, MN. Regulatory filings show the bank having equity of $13.0 million on assets of $127.2 million, as of December 31, 2017.

With 22 full-time employees, the bank has amassed loans and leases worth $64.5 million, including real estate loans of $37.1 million. U.S. bank customers currently have $113.6 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Security State Bank of Hibbing exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for an analysis of how the bank fared on the three key criteria Bankrate used to evaluate U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial fortitude, capital is valuable. It acts as a buffer against losses and as protection for accountholders when a bank is struggling financially. When it comes to safety and soundness, more capital is preferred.

Security State Bank of Hibbing came in below the national average of 13.13 on our test to measure the adequacy of a bank's capital, receiving a score of 12 out of a possible 30 points.

A bank's Tier 1 capital ratio is an important measure of this buffer. Security State Bank of Hibbing's Tier 1 capital ratio was 19.25 percent, above the 6 percent level considered adequate by regulators, but less than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather financial difficulties.

Overall, Security State Bank of Hibbing held equity amounting to 10.24 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to estimate the effect of problem assets, such as unpaid loans, on the bank's capitalization and allocated loan loss reserves.

Having large numbers of these kinds of assets may eventually force a bank to use capital to absorb losses, diminishing its buffer of equity. Many of those assets are also likely to be in non-accrual status and no longer earning money, decreasing earnings and elevating the chances of a failure in the future.

On Bankrate's asset quality test, Security State Bank of Hibbing scored 32 out of a possible 40 points, less than the national average of 37.49 points.

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, 5.14 percent of Security State Bank of Hibbing'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." Comparing how large that reserve is to the total amount of problematic loans can be a widely used indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Security State Bank of Hibbing's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance affects its safety and soundness. A bank can retain its earnings, boosting its capital buffer, or use them to address problematic loans, likely making the bank more resilient in tough times. However, banks that are losing money are less able to do those things.

Security State Bank of Hibbing received above-average marks on Bankrate's earnings test, achieving a score of 18 out of a possible 30.

One widely used way to measure a bank's earnings is return on equity, or net income (profit, essentially) divided by total equity. Security State Bank of Hibbing's most recent annualized quarterly return on equity was 9.43 percent, above the national average of 8.10 percent.

The bank earned net income of $1.2 million on total equity of $13.0 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.94 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.