Safe and Sound

First State Bank and Trust

Bayport, MN
5
Star Rating
Founded in 1914, First State Bank and Trust is an FDIC-insured bank based in Bayport, MN. Regulatory filings show the bank having equity of $21.9 million on assets of $243.6 million, as of December 31, 2017.

U.S. bank customers have $214.0 million on deposit at 7 offices in multiple states run by 70 full-time employees. With that footprint, the bank has amassed loans and leases worth $171.6 million, including $139.3 million worth of real estate loans.

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

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial stability, capital is crucial. It acts as a buffer against losses and as protection for depositors when a bank is experiencing economic instability. When it comes to safety and soundness, the more capital, the better.

First State Bank and Trust received a score of 8 out of a possible 30 points on our test to measure the adequacy of a bank's capital, failing to reach the national average of 13.13.

A bank's Tier 1 capital ratio is a widely used measure of this buffer. First State Bank and Trust's Tier 1 capital ratio was 13.01 percent, above the 6 percent level considered adequate by regulators, but below the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather financial downturns.

Overall, First State Bank and Trust held equity amounting to 8.97 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to try to understand how the bank's loan loss reserves and overall capitalization could be affected by problem assets, such as past-due mortgages.

Having lots of these types of assets means a bank could have to use capital to cover losses, shrinking 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, diminishing earnings and increasing the risk of a future failure.

First State Bank and Trust scored 40 out of a possible 40 points on Bankrate's asset quality test, beating the national average of 37.49.

The percentage of problem assets a bank holds compared to its total assets is a widely used indicator of asset quality.As of December 31, 2017, 0.19 percent of First State Bank and Trust'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 troubled assets . How large that reserve is can be a handy 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 State Bank and Trust's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its safety and soundness. A bank can retain its earnings, expanding its capital buffer, or put them to work addressing problematic loans, likely making the bank better prepared to withstand economic shocks. Losses, on the other hand, reduce a bank's ability to do those things.

First State Bank and Trust exceeded the national average on Bankrate's earnings test, achieving a score of 22 out of a possible 30.

Return on equity, calculated by dividing net income (profit, basically) by the total amount of equity, is one important measure of a bank's earnings. First State Bank and Trust's most recent annualized quarterly return on equity was 13.87 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $2.9 million on total equity of $21.9 million. The bank experienced an annualized return on average assets, or ROA, of 1.22 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.