Three area banks among nation’s safestA recent MSNMoney.com article identified 359 of America’s safest banks, three of which are in the Mitchell area.
By: Anna Jauhola, The Daily Republic
A recent MSNMoney.com article identified 359 of America’s safest banks, three of which are in the Mitchell area.
Menno State Bank, in Menno, Farmers State Bank, in Parkston, and The Security State Bank, in Emery, each received a rating of zero — a perfect score — when MSN Money performed the Texas Ratio for the banks’ assets.
“I had heard from a few people that they saw the article,” said Jim Schnaidt, president of Menno State Bank, and a fourth-generation banker. “But to me, it doesn’t mean much.”
Schnaidt credits his bank’s status to safe operations and his conservative customers.
A zero score on the Texas Ratio basically means a bank does not have any loans out that aren’t being paid back, he said.
“I credit a lot of people in the area who don’t borrow when they don’t need to borrow,” he said. “They’re all very conservative. It means they’re running a good operation.”
The Texas Ratio factors in the number of bad loans and the cushion provided to cover bad loans. If the bank has too many bad loans, they will slowly eat away at the bank cushion. If the bad loans continue to cause issues, the bank could fail.
Scott Bormann, president of Farmers State Bank in Parkston, attributes the bank’s status to conservative customers and business practices, doing business locally, and personal relationships between customers and employees.
“Our business model is we’ve always reinvested money into the local community,” said Bormann, a second-generation banker. “We don’t make out-of-state loans. We do the majority of our lending inside the local trade area.”
He said the low turnover of bank employees has helped build customer relationships and trust.
“Many of our customers are family farmers and small business owners. They do business the way they’re supposed to and we do business the way we’re supposed to,” Bormann said.
Jim Arend, president and owner of The Security State Bank in Emery, said his bank has always operated conservatively in order to stay in business. Arend’s grandfather started the bank shortly before the Great Depression and was the only one of four banks to survive in the town, Arend said.
That mentality has carried through the years and generations. Arend, who took over the bank from his grandfather in the 1970s, said the bank keeps “a considerable amount of tangible equity” for protection should something go wrong with a loan, the economy or something else.
“We’ve always retained a substantial amount of our annual earnings rather than pay out dividends,” he said. “With that purpose in mind, we could take care of any adversity that comes our way.”
Arend also credits conservativeness and his customers for the perfect score The Security State Bank received.
“I attribute a lot of our success to the fact that our customer base is very conservative and performs well,” he said.