Safe and Sound

Viking Bank

Alexandria, MN
4
Star Rating
Viking Bank is an Alexandria, MN-based, FDIC-insured bank founded in 1981. As of December 31, 2017, the bank held equity of $28.4 million on assets of $176.9 million.

Thanks to the work of 29 full-time employees, the bank holds loans and leases worth $143.9 million, $117.1 million of which are for real estate. U.S. bank customers currently have $137.6 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Viking Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a look at how the bank fared on the three important criteria Bankrate used to score U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital is a useful measurement of an institution's financial resilience. It works as a bulwark against losses and as protection for accountholders during times of financial trouble for the bank. 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, Viking Bank achieved a score of 14 out of a possible 30 points, beating the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Viking Bank's Tier 1 capital ratio was 12.77 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 stand up to financial difficulties.

Overall, Viking Bank held equity amounting to 16.07 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

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

A bank with lots of these kinds of assets may eventually be forced to use capital to cover losses, cutting down on 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, decreasing earnings and elevating the chances of a future failure.

Viking Bank scored 32 out of a possible 40 points on Bankrate's test of asset quality, lower than the national average of 37.49.

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, 1.92 percent of Viking Bank'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 troubled assets . Comparing how large that reserve is to the total amount of problem loans can be a helpful indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Viking Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability has an effect on its long-term survivability. Earnings can be retained by the bank, boosting its capital buffer, or be used to address 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.

On Bankrate's earnings test, Viking Bank scored 18 out of a possible 30, exceeding the national average of 15.12.

One important way to measure a bank's earnings is return on equity, or net income (profit, basically) divided by the total amount of equity. Viking Bank's most recent annualized quarterly return on equity was 9.34 percent, above the national average of 8.10 percent.

The bank reported net income of $2.7 million on total equity of $28.4 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 1.52 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.