Safe and Sound

Falcon National Bank

Foley, MN
5
Star Rating
Falcon National Bank is an FDIC-insured bank started in 2003 and currently based in Foley, MN. The bank has equity of $22.6 million on $265.6 million in assets, according to December 31, 2017, regulatory filings.

Thanks to the work of 58 full-time employees in 2 offices in MN, the bank has amassed loans and leases worth $206.0 million, including $125.9 million worth of real estate loans. The bank currently holds $240.5 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, Falcon National Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a look at how the bank fared on the three key criteria Bankrate used to score American banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a buffer against losses and affords protection for depositors during periods of economic instability for the bank. It follows then that a bank's level of capital is a crucial measurement of an institution's financial resilience. When it comes to safety and soundness, the higher the capital, the better.

On our test to measure the adequacy of a bank's capital, Falcon National Bank received a score of 8 out of a possible 30 points, below the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Falcon National Bank's Tier 1 capital ratio was 11.72 percent, higher than the 6 percent level considered adequate by regulators, but below the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather financial downturns.

Overall, Falcon National Bank held equity amounting to 8.51 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 problem assets, such as past-due loans.

Having lots of these types of assets means a bank could have to use capital to absorb losses, decreasing 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 money, resulting in reduced earnings and potentially more risk of a failure in the future.

Falcon National Bank scored 40 out of a possible 40 points on Bankrate's asset quality test, exceeding the national average of 37.49.

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, 0.70 percent of Falcon National Bank's loans were noncurrent, meaning 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 problem assets . 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 problem assets. Unfortunately, the FDIC did not provide information on Falcon National Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability affects its long-term survivability. Earnings may be retained by the bank, expanding its capital cushion, or be used to deal with problematic loans, likely making the bank better prepared to withstand economic shocks. Obviously, banks that are losing money have less ability to do those things.

Falcon National Bank scored 22 out of a possible 30 on Bankrate's earnings test, above the national average of 15.12.

One key measure of a bank's earnings is return on equity, or net income (profit, basically) divided by total equity. The most recent annualized quarterly return on equity for Falcon National Bank was 13.42 percent, above the national average of 8.10 percent.

The bank reported net income of $2.9 million on total equity of $22.6 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 1.17 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.