Safe and Sound

State Bank of New Richland

New Richland, MN
5
Star Rating
State Bank of New Richland is a New Richland, MN-based, FDIC-insured bank dating back to 1898. The bank has equity of $9.5 million on $105.7 million in assets, according to December 31, 2017, regulatory filings.

With 12 full-time employees, the bank holds loans and leases worth $87.8 million, including real estate loans of $63.4 million. U.S. bank customers currently have $76.8 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, State Bank of New Richland exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a look at how the bank fared on the three major criteria Bankrate used to grade U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a bulwark against losses and as protection for account holders when a bank is struggling financially. It follows then that when it comes to measuring an an institution's financial fortitude, capital is useful. When it comes to safety and soundness, more capital is better.

State Bank of New Richland fell below the national average of 13.13 on our test to measure the adequacy of a bank's capital, receiving a score of 10 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. State Bank of New Richland's Tier 1 capital ratio was 10.44 percent, exceeding 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, State Bank of New Richland held equity amounting to 9.02 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 impact of problem assets, such as unpaid loans, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

A bank with lots of these types of assets could eventually be forced to use capital to cover losses, diminishing its buffer of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning interest for the bank, resulting in diminished earnings and potentially more risk of a failure in the future.

State Bank of New Richland scored 36 out of a possible 40 points on Bankrate's asset quality test, falling short of the national average of 37.49.

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, 1.33 percent of State Bank of New Richland'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 known as an "allowance for loan and lease losses" to deal with troubled assets . 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 problematic loans. Unfortunately, the FDIC did not provide information on State Bank of New Richland's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability has an effect on its safety and soundness. A bank can retain its earnings, giving a boost to its capital buffer, or put them to work addressing problematic loans, likely making the bank better prepared to withstand economic shocks. Conversely, losses reduce a bank's ability to do those things.

State Bank of New Richland scored 30 out of a possible 30 on Bankrate's earnings test, above the national average of 15.12.

Return on equity, calculated by dividing net income (profit, basically) by the total amount of equity, is one key measure of a bank's earnings. State Bank of New Richland's most recent annualized quarterly return on equity was 25.25 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $2.5 million on total equity of $9.5 million. The bank experienced an annualized return on average assets, or ROA, of 2.45 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.