Safe and Sound

First State Bank of Fountain

Fountain, MN
3
Star Rating
Started in 1901, First State Bank of Fountain is an FDIC-insured bank based in Fountain, MN. Regulatory filings show the bank having equity of $3.3 million on $34.5 million in assets, as of December 31, 2017.

With 6 full-time employees, the bank currently holds loans and leases worth $16.1 million, including real estate loans of $11.7 million. U.S. bank customers currently have $29.7 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, First State Bank of Fountain exhibited a generally satisfactory condition, earning 3 out of 5 stars for safety and soundness. Keep reading for a look at how the bank fared on the three major criteria Bankrate used to score U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a cushion against losses and provides protection for depositors when a bank is struggling financially. It follows then that when it comes to measuring an an institution's financial stability, capital is valuable. When looking at safety and soundness, the higher the capital, the better.

On our test to measure the adequacy of a bank's capital, First State Bank of Fountain received a score of 10 out of a possible 30 points, lower than 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 Fountain's Tier 1 capital ratio was 16.63 percent, exceeding the 6 percent level regulators consider adequate, but below the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to economic challenges.

Overall, First State Bank of Fountain held equity amounting to 9.64 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to determine the impact of troubled assets, such as past-due loans, on the bank's capitalization and allocated loan loss reserves.

A bank with lots of these kinds of assets may eventually have to use capital to absorb losses, cutting down on 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, decreasing earnings and increasing the chances of a future failure.

On Bankrate's test of asset quality, First State Bank of Fountain scored 40 out of a possible 40 points, exceeding 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, none of First State Bank of Fountain'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 known as an "allowance for loan and lease losses" to deal with troubled assets . The size of that reserve can be a widely used indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on First State Bank of Fountain's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its safety and soundness. Earnings may be retained by the bank, expanding its capital cushion, or be used 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.

First State Bank of Fountain fell short of the national average on Bankrate's earnings test, achieving a score of 2 out of a possible 30.

Return on equity, calculated by dividing net income (profit, basically) by total equity, is one important way to measure a bank's earnings. First State Bank of Fountain's most recent annualized quarterly return on equity was 0.21 percent, below the national average of 8.10 percent.

The bank recorded net income of $7,000 on total equity of $3.3 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 0.02 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.