Safe and Sound

First Bank Blue Earth

Blue Earth, MN
5
Star Rating
Blue Earth, MN-based First Bank Blue Earth is an FDIC-insured bank started in 1869. The bank holds equity of $22.0 million on $220.7 million in assets, according to December 31, 2017, regulatory filings.

With 32 full-time employees, the bank holds loans and leases worth $152.6 million, including real estate loans of $81.8 million. U.S. bank customers currently have $189.5 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, First Bank Blue Earth 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 evaluate U.S. banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

Capital is a crucial measurement of a bank's financial fortitude. It acts as a bulwark against losses and as protection for accountholders during periods of economic trouble for the bank. From a safety and soundness perspective, the higher the capital, the better.

First Bank Blue Earth scored below the national average of 13.13 on our test to measure capital adequacy, receiving a score of 10 out of a possible 30 points.

A bank's Tier 1 capital ratio is an essential measure of this buffer. First Bank Blue Earth's Tier 1 capital ratio was 13.43 percent, higher than the 6 percent level regulators consider adequate, but under the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather financial challenges.

Overall, First Bank Blue Earth held equity amounting to 9.96 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test is intended to estimate how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by troubled assets, such as unpaid mortgages.

Having extensive holdings of these kinds of assets could eventually force a bank to use capital to cover losses, shrinking 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 money, decreasing earnings and elevating the chances of a future failure.

First Bank Blue Earth scored 36 out of a possible 40 points on Bankrate's asset quality test, below the national average of 37.49.

A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 1.37 percent of First Bank Blue Earth's loans were noncurrent, meaning 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 known as an "allowance for loan and lease losses" to deal with troubled assets . Comparing the size of that reserve to the total amount of problem loans can be a handy indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on First Bank Blue Earth's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its long-term survivability. A bank can retain its earnings, boosting its capital buffer, or put them to work addressing problematic loans, likely making the bank more resilient in tough times. Losses, on the other hand, take away from a bank's ability to do those things.

First Bank Blue Earth scored 26 out of a possible 30 on Bankrate's earnings test, beating the national average of 15.12.

Return on equity, calculated by dividing net income (profit, basically) by total equity, is one important measure of a bank's earnings. The most recent annualized quarterly return on equity for First Bank Blue Earth was 16.44 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $3.6 million on total equity of $22.0 million. The bank experienced an annualized return on average assets, or ROA, of 1.67 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.