Safe and Sound

COMMUNITY FIRST BANK

Menahga, MN
5
Star Rating
Started in 1898, COMMUNITY FIRST BANK is an FDIC-insured bank based in Menahga, MN. The bank holds equity of $13.0 million on assets of $90.1 million, according to December 31, 2017, regulatory filings.

U.S. bank customers have $76.1 million on deposit at 2 offices in MN run by 24 full-time employees. With that footprint, the bank holds loans and leases worth $48.0 million, including real estate loans of $31.4 million.

Overall, Bankrate believes that, as of December 31, 2017, COMMUNITY FIRST BANK exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's an analysis of 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 acts as a bulwark against losses and provides protection for account holders when a bank is experiencing financial trouble. It follows then that when it comes to measuring an a bank's financial strength, capital is valuable. When it comes to safety and soundness, the more capital, the better.

COMMUNITY FIRST BANK scored 18 out of a possible 30 points on our test to measure capital adequacy, beating out the national average of 13.13.

One widely followed measure of this buffer is a bank's Tier 1 capital ratio. COMMUNITY FIRST BANK's Tier 1 capital ratio was 24.06 percent, above 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 economic difficulties.

Overall, COMMUNITY FIRST BANK held equity amounting to 14.41 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test is intended to estimate how the bank's capitalization and allocated loan loss reserves could be affected by troubled assets, such as unpaid loans.

Having a large number of these types of assets could eventually require a bank to use capital to cover losses, shrinking its equity cushion. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, resulting in depressed earnings and potentially more risk of a future failure.

COMMUNITY FIRST BANK beat out the national average of 37.49 on Bankrate's test of asset quality, racking up 40 out of a possible 40 points .

A handy indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.45 percent of COMMUNITY FIRST 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 maintain a reserve to deal with troubled assets known as an "allowance for loan and lease losses." That reserve's size can be a widely used indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on COMMUNITY FIRST BANK'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, increasing its capital cushion, or be used to deal with problematic loans, potentially making the bank better prepared to withstand economic trouble. Losses, on the other hand, lessen a bank's ability to do those things.

COMMUNITY FIRST BANK scored 18 out of a possible 30 on Bankrate's test of earnings, beating out the national average of 15.12.

Return on equity, calculated by dividing net income (profit, basically) by total equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for COMMUNITY FIRST BANK was 9.67 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $1.3 million on total equity of $13.0 million. The bank experienced an annualized return on average assets, or ROA, of 1.40 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.