Safe and Sound

ESB Bank

Caledonia, MN
3
Star Rating
Founded in 1909, ESB Bank is an FDIC-insured bank headquartered in Caledonia, MN. Regulatory filings show the bank having equity of $10.0 million on $100.3 million in assets, as of December 31, 2017.

U.S. bank customers have $80.8 million on deposit at 3 offices in MN run by 17 full-time employees. With that footprint, the bank currently holds loans and leases worth $73.2 million, including $40.7 million worth of real estate loans.

Overall, Bankrate believes that, as of December 31, 2017, ESB Bank exhibited a generally satisfactory condition, earning 3 out of 5 stars for safety and soundness. Here's an analysis of how the bank fared on the three major criteria Bankrate used to score American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital is a valuable measurement of an institution's financial strength. It acts as a bulwark against losses and as protection for accountholders when a bank is experiencing economic trouble. When it comes to safety and soundness, more capital is preferred.

ESB Bank fell short of the national average of 13.13 on our test to measure capital adequacy, achieving a score of 10 out of a possible 30 points.

A bank's Tier 1 capital ratio is a commonly used measure of this buffer. ESB Bank's Tier 1 capital ratio was 12.87 percent, higher than the 6 percent level considered adequate by regulators, but below the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather economic difficulties.

Overall, ESB Bank held equity amounting to 9.94 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

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

A bank with lots of these types of assets may eventually be required to use capital to cover losses, cutting down on its buffer 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, reducing earnings and elevating the risk of a future failure.

ESB Bank scored below the national average of 37.49 on Bankrate's asset quality test, racking up 20 out of a possible 40 points .

A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 5.42 percent of ESB 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 to handle problem assets known as an "allowance for loan and lease losses." Comparing how large that reserve is to the total amount of problematic loans can be a helpful indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on ESB Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance has an effect on its safety and soundness. Earnings can be retained by the bank, giving a boost to its capital buffer, or be used to address problematic loans, likely making the bank better able to withstand financial shocks. Obviously, banks that are losing money have less ability to do those things.

ESB Bank did above-average on Bankrate's test of earnings, achieving a score of 24 out of a possible 30.

Return on equity, calculated by dividing net income (essentially, profit) by total equity, is one important way to measure a bank's earnings. ESB Bank's most recent annualized quarterly return on equity was 15.59 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $1.5 million on total equity of $10.0 million. The bank reported an annualized return on average assets, or ROA, of 1.56 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.