Safe and Sound

First State Bank Minnesota

Le Roy, MN
5
Star Rating
First State Bank Minnesota is a Le Roy, MN-based, FDIC-insured bank that opened its doors in 1893. Regulatory filings show the bank having equity of $7.0 million on $68.1 million in assets, as of December 31, 2017.

U.S. bank customers have $60.7 million on deposit at 2 offices in MN run by 15 full-time employees. With that footprint, the bank currently holds loans and leases worth $43.5 million, including $19.5 million worth of real estate loans.

Overall, Bankrate believes that, as of December 31, 2017, First State Bank Minnesota exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a look at how the bank did on the three important 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

Capital is an essential measurement of an institution's financial strength. It acts as a cushion against losses and as protection for accountholders during times of financial trouble for the bank. When it comes to safety and soundness, the higher the capital, the better.

First State Bank Minnesota scored below the national average of 13.13 on our test to measure the adequacy of a bank's capital, scoring 12 out of a possible 30 points.

A bank's Tier 1 capital ratio is an important measure of this buffer. First State Bank Minnesota's Tier 1 capital ratio was 15.21 percent, above the 6 percent level considered adequate by regulators, but below the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to economic challenges.

Overall, First State Bank Minnesota held equity amounting to 10.33 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 problem assets, such as past-due loans.

Having large numbers of these types of assets could eventually require a bank to use capital to absorb losses, shrinking its cushion of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning interest for the bank, pushing down earnings and elevating the risk of a future failure.

First State Bank Minnesota scored above the national average of 37.49 on Bankrate's asset quality test, racking up 40 out of a possible 40 points .

The percentage of problem assets a bank holds compared to its total assets is a useful indicator of asset quality.As of December 31, 2017, 0.03 percent of First State Bank Minnesota'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 maintain a reserve to handle problem assets known as an "allowance for loan and lease losses." Comparing the size of that reserve to the total amount of at-risk loans can be a handy indicator when evaluating a bank's ability to manage troubled assets. First State Bank Minnesota's loan loss allowance was 5,628.57 percent of its total noncurrent loans, above the national average. All else being equal, a higher ratio of loan loss allowance to noncurrent loans is better.

Earnings score

How profitable a bank is affects its safety and soundness. A bank can retain its earnings, giving a boost to its capital cushion, or use them to deal with problematic loans, potentially making the bank better able to withstand economic trouble. Losses, on the other hand, reduce a bank's ability to do those things.

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

Return on equity, calculated by dividing net income (essentially, profit) by total equity, is one important way to measure a bank's earnings. First State Bank Minnesota's most recent annualized quarterly return on equity was 13.66 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $928,000 on total equity of $7.0 million. The bank had an annualized return on average assets, or ROA, of 1.38 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.