Safe and Sound

First Security Bank-Hendricks

Hendricks, MN
5
Star Rating
First Security Bank-Hendricks is an FDIC-insured bank founded in 1940 and currently headquartered in Hendricks, MN. Regulatory filings show the bank having equity of $3.2 million on assets of $29.3 million, as of December 31, 2017.

With 6 full-time employees, the bank holds loans and leases worth $11.1 million, including real estate loans of $7.3 million. U.S. bank customers currently have $26.0 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, First Security Bank-Hendricks exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a breakdown of how the bank did on the three major criteria Bankrate used to grade U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

Capital works as a bulwark against losses and affords protection for depositors during periods of economic trouble for the bank. Therefore, when it comes to measuring an a bank's financial strength, capital is essential. When looking at safety and soundness, more capital is preferred.

On our test to measure capital adequacy, First Security Bank-Hendricks racked up 14 out of a possible 30 points, better than the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. First Security Bank-Hendricks's Tier 1 capital ratio was 24.91 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, First Security Bank-Hendricks held equity amounting to 11.08 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test is intended to try to understand how the bank's capitalization and allocated loan loss reserves could be affected by problem assets, such as unpaid mortgages.

Having lots of these kinds of assets could eventually force a bank to use capital to absorb losses, diminishing 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 money, resulting in lower earnings and potentially more risk of a future failure.

On Bankrate's test of asset quality, First Security Bank-Hendricks scored 40 out of a possible 40 points, better than the national average of 37.49 points.

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, 0.24 percent of First Security Bank-Hendricks'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 known as an "allowance for loan and lease losses" to deal with problem assets . How large that reserve is can be a helpful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on First Security Bank-Hendricks's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance affects its long-term survivability. A bank can retain its earnings, increasing its capital buffer, or use them to address problematic loans, likely making the bank better able to withstand financial shocks. Banks that are losing money, however, are less able to do those things.

First Security Bank-Hendricks scored 22 out of a possible 30 on Bankrate's earnings test, beating out the national average of 15.12.

One important way to measure a bank's earnings is return on equity, calculated by dividing net income (profit, basically) by the total amount of equity. The most recent annualized quarterly return on equity for First Security Bank-Hendricks was 13.81 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $427,000 on total equity of $3.2 million. The bank reported an annualized return on average assets, or ROA, of 1.52 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.