Safe and Sound

First State Bank of Clearbrook

Clearbrook, MN
3
Star Rating
First State Bank of Clearbrook is a Clearbrook, MN-based, FDIC-insured bank dating back to 1910. The bank holds equity of $5.8 million on $51.7 million in assets, according to December 31, 2017, regulatory filings.

With 9 full-time employees, the bank holds loans and leases worth $23.4 million, including real estate loans of $14.7 million. U.S. bank customers currently have $45.5 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, First State Bank of Clearbrook exhibited a generally satisfactory condition, earning 3 out of 5 stars for safety and soundness. Here's an analysis of how the bank fared on the three key criteria Bankrate used to grade U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital is a valuable measurement of a bank's financial strength. It acts as a cushion against losses and as protection for accountholders when a bank is experiencing economic instability. When looking at safety and soundness, the higher the capital, the better.

First State Bank of Clearbrook fell below the national average of 13.13 on our test to measure capital adequacy, receiving a score of 8 out of a possible 30 points.

A bank's Tier 1 capital ratio is a commonly used measure of this buffer. First State Bank of Clearbrook's Tier 1 capital ratio was 15.45 percent, exceeding the 6 percent level regulators consider adequate, but less than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to financial downturns.

Overall, First State Bank of Clearbrook held equity amounting to 11.25 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to estimate the effect of problem assets, such as past-due mortgages, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

A bank with a large number of these types of assets could eventually be required to use capital to cover 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, diminishing earnings and elevating the risk of a future failure.

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

A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.26 percent of First State Bank of Clearbrook'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 maintain a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . The size of that reserve can be a handy indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on First State Bank of Clearbrook's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its safety and soundness. Earnings can be retained by the bank, increasing its capital cushion, or be used to deal with problematic loans, likely making the bank better able to withstand financial shocks. Obviously, banks that are losing money have less ability to do those things.

On Bankrate's test of earnings, First State Bank of Clearbrook scored 2 out of a possible 30, below the national average of 15.12.

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 of Clearbrook's most recent annualized quarterly return on equity was 0.33 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $15,000 on total equity of $5.8 million. The bank reported an annualized return on average assets, or ROA, of 0.03 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.