Safe and Sound

Wadena State Bank

Wadena, MN
5
Star Rating
Founded in 1917, Wadena State Bank is an FDIC-insured bank based in Wadena, MN. The bank holds equity of $17.3 million on assets of $172.9 million, according to December 31, 2017, regulatory filings.

With 33 full-time employees in 4 offices in MN, the bank holds loans and leases worth $101.6 million, including real estate loans of $74.5 million. U.S. bank customers currently have $154.5 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Wadena State Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a breakdown of how the bank did 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 a bank's financial fortitude, capital is valuable. It works as a cushion against losses and affords protection for accountholders during periods of economic instability for the bank. When looking at safety and soundness, the higher the capital, the better.

On our test to measure capital adequacy, Wadena State Bank received a score of 10 out of a possible 30 points, coming in below the national average of 13.13.

A bank's Tier 1 capital ratio is a commonly used measure of this buffer. Wadena State Bank's Tier 1 capital ratio was 13.47 percent, above the 6 percent level considered adequate by regulators, 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, Wadena State Bank held equity amounting to 10.02 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 effect of problem assets, such as past-due mortgages, on the bank's loan loss reserves and overall capitalization.

Having large numbers of these types of assets suggests a bank could have to use capital to cover losses, reducing its cushion of equity. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning interest for the bank, decreasing earnings and increasing the risk of a failure in the future.

On Bankrate's asset quality test, Wadena State Bank scored 40 out of a possible 40 points, above the national average of 37.49 points.

The percentage of problem assets a bank holds compared to its total assets is a handy indicator of asset quality.As of December 31, 2017, 0.95 percent of Wadena State Bank's loans were noncurrent -- in other words, 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 known as an "allowance for loan and lease losses" to deal with troubled assets . How large that reserve is 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 Wadena State Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its safety and soundness. A bank can retain its earnings, increasing its capital buffer, or use them to deal with problematic loans, likely making the bank better prepared to withstand economic trouble. Banks that are losing money, however, have less ability to do those things.

Wadena State Bank did above-average on Bankrate's test of earnings, achieving a score of 20 out of a possible 30.

One key way to measure a bank's earnings is return on equity, calculated by dividing net income (profit, basically) by total equity. Wadena State Bank's most recent annualized quarterly return on equity was 10.92 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $1.8 million on total equity of $17.3 million. The bank experienced an annualized return on average assets, or ROA, of 1.15 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.