Safe and Sound

Security State Bank of Wanamingo

Wanamingo, MN
5
Star Rating
Founded in 1917, Security State Bank of Wanamingo is an FDIC-insured bank based in Wanamingo, MN. As of December 31, 2017, the bank held equity of $7.4 million on $71.0 million in assets.

With 11 full-time employees, the bank has amassed loans and leases worth $40.0 million, including real estate loans of $28.0 million. U.S. bank customers currently have $63.5 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Security State Bank of Wanamingo exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a look at how the bank fared on the three key criteria Bankrate used to evaluate American 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 fortitude, capital is essential. It acts as a bulwark against losses and as protection for depositors when a bank is experiencing economic trouble. When it comes to safety and soundness, more capital is better.

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

A bank's Tier 1 capital ratio is an essential measure of this buffer. Security State Bank of Wanamingo's Tier 1 capital ratio was 15.95 percent, higher than 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 weather economic difficulties.

Overall, Security State Bank of Wanamingo held equity amounting to 10.45 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to estimate the effect of troubled assets, such as past-due mortgages, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

Having a large number of these kinds of assets could eventually require a bank to use capital to absorb losses, decreasing its cushion of equity. It also means that there are likely to be many assets that are in non-accrual status and no longer earning interest for the bank, pushing down earnings and elevating the risk of a failure in the future.

Security State Bank of Wanamingo beat out the national average of 37.49 on Bankrate's asset quality test, racking up 40 out of a possible 40 points .

The percentage of problem assets a bank holds compared to its total assets is a widely used indicator of asset quality.As of December 31, 2017, 0.25 percent of Security State Bank of Wanamingo's loans were noncurrent, meaning 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 to deal with troubled assets known as an "allowance for loan and lease losses." The size of that reserve can be a useful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on Security State Bank of Wanamingo's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its safety and soundness. Earnings may be retained by the bank, expanding its capital buffer, or be used to deal with problematic loans, potentially making the bank better able to withstand economic trouble. Losses, on the other hand, diminish a bank's ability to do those things.

Security State Bank of Wanamingo beat the national 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 (profit, essentially) by the total amount of equity, is one key measure of a bank's earnings. The most recent annualized quarterly return on equity for Security State Bank of Wanamingo was 11.30 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $826,000 on total equity of $7.4 million. The bank had an annualized return on average assets, or ROA, of 1.25 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.