Safe and Sound

First State Bank of Sauk Centre

Sauk Centre, MN
5
Star Rating
Sauk Centre, MN-based First State Bank of Sauk Centre is an FDIC-insured bank founded in 1880. The bank holds equity of $13.6 million on assets of $102.5 million, according to December 31, 2017, regulatory filings.

With 19 full-time employees in 2 offices in MN, the bank has amassed loans and leases worth $72.9 million, including real estate loans of $49.1 million. U.S. bank customers currently have $87.6 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, First State Bank of Sauk Centre exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a look at how the bank fared on the three major criteria Bankrate used to score U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

Capital acts as a cushion against losses and affords protection for depositors when a bank is struggling financially. Therefore, a bank's level of capital is a key measurement of a bank's financial fortitude. When it comes to safety and soundness, more capital is preferred.

First State Bank of Sauk Centre beat out the national average of 13.13 points on our test to measure the adequacy of a bank's capital, scoring 14 out of a possible 30 points.

One widely used measure of this buffer is a bank's Tier 1 capital ratio. First State Bank of Sauk Centre's Tier 1 capital ratio was 17.29 percent, exceeding the 6 percent level considered adequate by regulators, but less than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to economic headwinds.

Overall, First State Bank of Sauk Centre held equity amounting to 13.31 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 problem assets, such as past-due loans, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

A bank with a large number of these kinds of assets may eventually be required to use capital to cover losses, reducing its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning interest for the bank, resulting in reduced earnings and potentially more risk of a future failure.

On Bankrate's test of asset quality, First State Bank of Sauk Centre 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 Sauk Centre'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 keep a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . Comparing how large that reserve is to the total amount of at-risk loans can be a handy indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on First State Bank of Sauk Centre's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability has an effect on its long-term survivability. Earnings may be retained by the bank, giving a boost to its capital buffer, or be used to address problematic loans, likely making the bank better able to withstand economic shocks. Conversely, losses lessen a bank's ability to do those things.

On Bankrate's test of earnings, First State Bank of Sauk Centre scored 20 out of a possible 30, better than the national average of 15.12.

One important way to measure a bank's earnings is return on equity, or net income (essentially profit) divided by the total amount of equity. First State Bank of Sauk Centre's most recent annualized quarterly return on equity was 10.78 percent, above the national average of 8.10 percent.

The bank earned net income of $1.4 million on total equity of $13.6 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 1.46 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.