Safe and Sound

First State Bank of Grove City

Grove City, MN
5
Star Rating
First State Bank of Grove City is an FDIC-insured bank started in 1907 and currently based in Grove City, MN. Regulatory filings show the bank having equity of $5.4 million on assets of $25.7 million, as of December 31, 2017.

With 6 full-time employees, the bank currently holds loans and leases worth $16.2 million, including real estate loans of $11.5 million. U.S. bank customers currently have $20.2 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, First State Bank of Grove City 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 key criteria Bankrate used to grade U.S. banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

Capital is an important measurement of an institution's financial strength. It acts as a bulwark against losses and provides protection for depositors when a bank is experiencing economic instability. From a safety and soundness perspective, the higher the capital, the better.

First State Bank of Grove City scored 30 out of a possible 30 points on our test to measure capital adequacy, beating out the national average of 13.13.

One widely followed measure of this buffer is a bank's Tier 1 capital ratio. First State Bank of Grove City's Tier 1 capital ratio was 37.64 percent, exceeding the 6 percent level regulators consider adequate, and above the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to economic downturns.

Overall, First State Bank of Grove City held equity amounting to 21.21 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to estimate the impact of troubled assets, such as unpaid mortgages, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

Having large numbers of these types of assets could eventually force a bank to use capital to cover losses, shrinking its equity buffer. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, resulting in lower earnings and potentially more risk of a future failure.

First State Bank of Grove City scored 32 out of a possible 40 points on Bankrate's test of asset quality, below the national average of 37.49.

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, 7.08 percent of First State Bank of Grove City's loans were noncurrent -- in other words, they were more than 90 days past due or were in non-accrual status. That's above the national average of 1.01 percent.

Banks keep a reserve to deal with troubled assets known as an "allowance for loan and lease losses." Comparing the reserve's size to the total amount of at-risk loans can be a widely used indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on First State Bank of Grove City's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its long-term survivability. A bank can retain its earnings, boosting its capital cushion, or use them to deal with problematic loans, likely making the bank better able to withstand financial shocks. Obviously, banks that are losing money are less able to do those things.

On Bankrate's earnings test, First State Bank of Grove City scored 14 out of a possible 30, coming in below the national average of 15.12.

Return on equity, calculated by dividing net income (profit, basically) by the total amount of equity, is one key measure of a bank's earnings. First State Bank of Grove City's most recent annualized quarterly return on equity was 7.03 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $376,000 on total equity of $5.4 million. The bank reported an annualized return on average assets, or ROA, of 1.54 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.