Safe and Sound

Frandsen Bank & Trust

Lonsdale, MN
4
Star Rating
Started in 1901, Frandsen Bank & Trust is an FDIC-insured bank headquartered in Lonsdale, MN. The bank has equity of $208.1 million on assets of $1.73 billion, according to December 31, 2017, regulatory filings.

Thanks to the efforts of 388 full-time employees in 38 offices in multiple states, the bank has amassed loans and leases worth $1.05 billion, including $764.6 million worth of real estate loans. U.S. bank customers currently have $1.47 billion in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Frandsen Bank & Trust exhibited a good condition, earning 4 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 evaluate U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a buffer against losses and provides protection for depositors during periods of economic instability for the bank. It follows then that a bank's level of capital is an essential measurement of an institution's financial fortitude. When it comes to safety and soundness, the more capital, the better.

Frandsen Bank & Trust received a score of 6 out of a possible 30 points on our test to measure the adequacy of a bank's capital, coming in below the national average of 13.13.

A bank's Tier 1 capital ratio is an essential measure of this buffer. Frandsen Bank & Trust's Tier 1 capital ratio was 11.72 percent, higher than the 6 percent level considered adequate by regulators, but under the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to financial downturns.

Overall, Frandsen Bank & Trust held equity amounting to 12.02 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test is intended to estimate how the bank's loan loss reserves and overall capitalization could be affected by troubled assets, such as past-due mortgages.

Having lots of these kinds of assets suggests a bank may have to use capital to absorb losses, shrinking its cushion of equity. Many of those assets are also likely to be in non-accrual status and no longer earning money, resulting in diminished earnings and potentially more risk of a future failure.

On Bankrate's test of asset quality, Frandsen Bank & Trust scored 40 out of a possible 40 points, exceeding the national average of 37.49 points.

The percentage of problem assets a bank holds compared to its total assets is a widely used indicator of asset quality.As of December 31, 2017, 0.50 percent of Frandsen Bank & Trust'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 to handle problem assets known as an "allowance for loan and lease losses." That reserve's size can be a useful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on Frandsen Bank & Trust's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its safety and soundness. A bank can retain its earnings, expanding its capital cushion, or put them to work addressing problematic loans, potentially making the bank more resilient in times of trouble. Banks that are losing money, however, have less ability to do those things.

Frandsen Bank & Trust exceeded the national average on Bankrate's earnings test, achieving a score of 20 out of a possible 30.

One important way to measure a bank's earnings is return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity. Frandsen Bank & Trust's most recent annualized quarterly return on equity was 11.99 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $24.6 million on total equity of $208.1 million. The bank experienced an annualized return on average assets, or ROA, of 1.45 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.