Safe and Sound

F & M Bank Minnesota

Olivia, MN
4
Star Rating
Started in 1919, F & M Bank Minnesota is an FDIC-insured bank headquartered in Olivia, MN. Regulatory filings show the bank having equity of $11.7 million on assets of $115.1 million, as of December 31, 2017.

With 23 full-time employees in 3 offices in MN, the bank holds loans and leases worth $78.6 million, including real estate loans of $32.6 million. U.S. bank customers currently have $99.1 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, F & M Bank Minnesota exhibited a good condition, earning 4 out of 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.

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THE INSTITUTION'S SCORE

Capital Score

Capital is an important measurement of an institution's financial strength. It acts as a bulwark against losses and as protection for depositors when a bank is struggling financially. From a safety and soundness perspective, the more capital, the better.

On our test to measure capital adequacy, F & M Bank Minnesota received a score of 10 out of a possible 30 points, lower than the national average of 13.13.

A bank's Tier 1 capital ratio is an essential measure of this buffer. F & M Bank Minnesota's Tier 1 capital ratio was 11.43 percent, higher than the 6 percent level considered adequate by regulators, but less than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather financial challenges.

Overall, F & M Bank Minnesota held equity amounting to 10.13 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to determine the impact of troubled assets, such as past-due mortgages, on the bank's capitalization and allocated loan loss reserves.

Having extensive holdings of these types of assets may eventually force 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 thus aren't earning interest for the bank, resulting in depressed earnings and potentially more risk of a failure in the future.

F & M Bank Minnesota scored 36 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, 1.13 percent of F & M Bank Minnesota'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 maintain a reserve to handle troubled assets known as an "allowance for loan and lease losses." The size of that reserve can be a helpful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on F & M Bank Minnesota's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money affects its long-term survivability. Earnings may be retained by the bank, giving a boost to its capital buffer, or be used to deal with problematic loans, potentially making the bank more resilient in tough times. Losses, on the other hand, diminish a bank's ability to do those things.

F & M Bank Minnesota did above-average on Bankrate's earnings test, achieving a score of 20 out of a possible 30.

One widely used way to measure a bank's earnings is return on equity, or net income (profit, essentially) divided by the total amount of equity. F & M Bank Minnesota's most recent annualized quarterly return on equity was 10.74 percent, above the national average of 8.10 percent.

The bank earned net income of $1.2 million on total equity of $11.7 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 1.00 percent, right at the level deemed satisfactory in accordance with industry standards, and equal to 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.