Safe and Sound

Ormsby State Bank

Ormsby, MN
5
Star Rating
Ormsby State Bank is an Ormsby, MN-based, FDIC-insured bank dating back to 1901. Regulatory filings show the bank having equity of $3.9 million on assets of $25.8 million, as of December 31, 2017.

With 6 full-time employees, the bank holds loans and leases worth $10.5 million, including real estate loans of $5.2 million. U.S. bank customers currently have $21.9 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Ormsby State Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a breakdown of how the bank fared on the three key criteria Bankrate used to evaluate U.S. banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

Capital is a useful measurement of an institution's financial fortitude. It acts as a buffer against losses and provides protection for accountholders when a bank is experiencing financial instability. When it comes to safety and soundness, the more capital, the better.

Ormsby State Bank racked up 22 out of a possible 30 points on our test to measure the adequacy of a bank's capital, beating out the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Ormsby State Bank's Tier 1 capital ratio was 35.89 percent, above the 6 percent level considered adequate by regulators, and above the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather economic challenges.

Overall, Ormsby State Bank held equity amounting to 15.04 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test is intended to try to understand how the bank's capitalization and allocated loan loss reserves could be affected by troubled assets, such as unpaid loans.

A bank with extensive holdings of these kinds of assets may eventually have to use capital to absorb losses, decreasing its buffer of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, pushing down earnings and increasing the chances of a failure in the future.

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

A handy 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 Ormsby State Bank'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 to handle troubled 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 problem assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on Ormsby State Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability affects its safety and soundness. Earnings can be retained by the bank, increasing its capital buffer, or be used to deal with problematic loans, potentially making the bank better able to withstand financial shocks. Conversely, losses reduce a bank's ability to do those things.

Ormsby State Bank scored 16 out of a possible 30 on Bankrate's test of earnings, above the national average of 15.12.

Return on equity, calculated by dividing net income (essentially, profit) by total equity, is one key measure of a bank's earnings. The most recent annualized quarterly return on equity for Ormsby State Bank was 7.81 percent, below the national average of 8.10 percent.

The bank earned net income of $299,000 on total equity of $3.9 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 1.17 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.