Safe and Sound

First State Bank of Ashby

Ashby, MN
4
Star Rating
First State Bank of Ashby is an Ashby, MN-based, FDIC-insured bank that opened its doors in 1900. The bank holds equity of $2.9 million on $36.6 million in assets, according to December 31, 2017, regulatory filings.

Thanks to the work of 9 full-time employees, the bank currently holds loans and leases worth $22.5 million, $16.0 million of which are for real estate. U.S. bank customers currently have $33.5 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, First State Bank of Ashby exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a look at how the bank did on the three major criteria Bankrate used to score American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a bulwark against losses and as protection for account holders during times of financial trouble for the bank. It follows then that when it comes to measuring an a bank's financial resilience, capital is essential. When it comes to safety and soundness, the higher the capital, the better.

First State Bank of Ashby received a score of 6 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 way to measure this buffer is looking at a bank's Tier 1 capital ratio. First State Bank of Ashby's Tier 1 capital ratio was 13.56 percent, higher than the 6 percent level considered adequate by regulators, but lower than the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to economic difficulties.

Overall, First State Bank of Ashby held equity amounting to 8.00 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

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

Having large numbers of these types of assets means a bank may eventually have to use capital to cover losses, shrinking its equity cushion. It also means that there are likely to be many assets that are in non-accrual status and no longer earning interest for the bank, pushing down earnings and elevating the chances of a future failure.

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

A handy indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.19 percent of First State Bank of Ashby'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 troubled assets known as an "allowance for loan and lease losses." Comparing how large that reserve is to the total amount of problematic loans can be a helpful indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on First State Bank of Ashby'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, increasing its capital buffer, or use them to address problematic loans, potentially making the bank more resilient in times of trouble. Losses, on the other hand, take away from a bank's ability to do those things.

On Bankrate's earnings test, First State Bank of Ashby scored 20 out of a possible 30, beating out the national average of 15.12.

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 of Ashby's most recent annualized quarterly return on equity was 10.50 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $298,000 on total equity of $2.9 million. The bank reported an annualized return on average assets, or ROA, of 0.85 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.