Safe and Sound

First State Bank of Wabasha

Wabasha, MN
5
Star Rating
First State Bank of Wabasha is an FDIC-insured bank founded in 1881 and currently based in Wabasha, MN. As of December 31, 2017, the bank held equity of $14.9 million on $126.4 million in assets.

U.S. bank customers have $111.3 million on deposit at 2 offices in MN run by 22 full-time employees. With that footprint, the bank has amassed loans and leases worth $39.3 million, including real estate loans of $30.7 million.

Overall, Bankrate believes that, as of December 31, 2017, First State Bank of Wabasha exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a breakdown of how the bank did on the three important criteria Bankrate used to evaluate American banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial strength, capital is essential. It works as a cushion against losses and affords protection for depositors when a bank is experiencing financial instability. From a safety and soundness perspective, the more capital, the better.

First State Bank of Wabasha racked up 14 out of a possible 30 points on our test to measure capital adequacy, exceeding 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 Wabasha's Tier 1 capital ratio was 28.86 percent, exceeding the 6 percent level regulators consider adequate, and higher than the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather economic downturns.

Overall, First State Bank of Wabasha held equity amounting to 11.82 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to estimate the effect of troubled assets, such as unpaid loans, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

Having lots of these kinds of assets suggests a bank may eventually have to use capital to absorb 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 money, resulting in diminished earnings and potentially more risk of a failure in the future.

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

The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of December 31, 2017, 1.14 percent of First State Bank of Wabasha's loans were noncurrent, meaning 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 known as an "allowance for loan and lease losses" to deal with troubled assets . Comparing the size of that reserve to the total amount of problem 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 Wabasha's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money has an effect on its safety and soundness. Earnings can be retained by the bank, increasing its capital cushion, or be used to address problematic loans, potentially making the bank better able to withstand economic trouble. Obviously, banks that are losing money have less ability to do those things.

First State Bank of Wabasha scored 22 out of a possible 30 on Bankrate's test of earnings, better than the national average of 15.12.

One key way to measure a bank's earnings is return on equity, or net income (profit, essentially) divided by the total amount of equity. The most recent annualized quarterly return on equity for First State Bank of Wabasha was 12.63 percent, above the national average of 8.10 percent.

The bank recorded net income of $1.9 million on total equity of $14.9 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 1.43 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.