Safe and Sound

Security State Bank of Kenyon

Kenyon, MN
2
Star Rating
Started in 1934, Security State Bank of Kenyon is an FDIC-insured bank headquartered in Kenyon, MN. Regulatory filings show the bank having equity of $6.2 million on assets of $57.5 million, as of December 31, 2017.

Thanks to the efforts of 15 full-time employees, the bank has amassed loans and leases worth $47.1 million, including real estate loans of $28.0 million. U.S. bank customers currently have $51.1 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Security State Bank of Kenyon exhibited a below-average condition, earning 2 out of 5 stars for safety and soundness. Here's a look at how the bank did on the three major criteria Bankrate used to score U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital is a key measurement of an institution's financial resilience. It works as a buffer against losses and provides protection for accountholders when a bank is experiencing financial instability. When looking at safety and soundness, the more capital, the better.

Security State Bank of Kenyon received a score of 12 out of a possible 30 points on our test to measure capital adequacy, less than the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Security State Bank of Kenyon's Tier 1 capital ratio was 12.20 percent, exceeding the 6 percent level considered adequate by regulators, 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 economic challenges.

Overall, Security State Bank of Kenyon held equity amounting to 10.82 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to determine the impact of troubled assets, such as unpaid mortgages, on the bank's capitalization and allocated loan loss reserves.

A bank with a large number of these kinds of assets could eventually have to use capital to cover losses, shrinking 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 lower earnings and potentially more risk of a failure in the future.

Security State Bank of Kenyon fell short of the national average of 37.49 on Bankrate's test of asset quality, racking up 20 out of a possible 40 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, 6.13 percent of Security State Bank of Kenyon'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 keep a reserve known as an "allowance for loan and lease losses" to deal with problem assets . 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 problem assets. Unfortunately, the FDIC did not provide information on Security State Bank of Kenyon's loan loss allowance in its most recent filings.

Earnings score

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

On Bankrate's earnings test, Security State Bank of Kenyon scored 6 out of a possible 30, falling short of the national average of 15.12.

Return on equity, calculated by dividing net income (profit, basically) 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 Kenyon was 2.10 percent, below the national average of 8.10 percent.

The bank reported net income of $130,000 on total equity of $6.2 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 0.23 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.