Safe and Sound

First National Bank Minnesota

4
Star Rating
St. Peter, MN-based First National Bank Minnesota is an FDIC-insured bank started in 1857. As of December 31, 2017, the bank held equity of $21.9 million on assets of $205.7 million.

Thanks to the work of 46 full-time employees in 3 offices in MN, the bank currently holds loans and leases worth $127.7 million, including real estate loans of $80.4 million. U.S. bank customers currently have $181.3 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, First National Bank Minnesota exhibited a good condition, earning 4 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 grade American banks.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial strength, capital is crucial. It acts as a buffer against losses and provides protection for depositors when a bank is struggling financially. From a safety and soundness perspective, the more capital, the better.

First National Bank Minnesota received a score of 12 out of a possible 30 points on our test to measure the adequacy of a bank's capital, falling short of the national average of 13.13.

One widely used measure of this buffer is a bank's Tier 1 capital ratio. First National Bank Minnesota's Tier 1 capital ratio was 14.67 percent, exceeding the 6 percent level regulators consider adequate, but below the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to financial downturns.

Overall, First National Bank Minnesota held equity amounting to 10.64 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to estimate the effect of problem assets, such as past-due mortgages, on the bank's loan loss reserves and overall capitalization.

A bank with extensive holdings of these kinds of assets may eventually have to use capital to absorb losses, diminishing its cushion of equity. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, resulting in depressed earnings and potentially more risk of a failure in the future.

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

The percentage of problem assets a bank holds compared to its total assets is a handy indicator of asset quality.As of December 31, 2017, 0.73 percent of First National 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 below the national average of 1.01 percent.

Banks keep a reserve to deal with troubled assets known as an "allowance for loan and lease losses." That reserve's size can be a helpful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on First National Bank Minnesota's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its safety and soundness. A bank can retain its earnings, expanding its capital cushion, or put them to work addressing problematic loans, potentially making the bank more resilient in tough times. However, banks that are losing money are less able to do those things.

First National Bank Minnesota fell behind the national average on Bankrate's test of earnings, achieving a score of 8 out of a possible 30.

One widely used measure of a bank's earnings is return on equity, calculated by dividing net income (profit, essentially) by total equity. First National Bank Minnesota's most recent annualized quarterly return on equity was 3.94 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $855,000 on total equity of $21.9 million. The bank experienced an annualized return on average assets, or ROA, of 0.42 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below 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.