Safe and Sound

Premier Bank Minnesota

Farmington, MN
5
Star Rating
Premier Bank Minnesota is an FDIC-insured bank started in 1990 and currently headquartered in Farmington, MN. The bank has equity of $21.2 million on $207.3 million in assets, according to December 31, 2017, regulatory filings.

With 34 full-time employees in 8 offices in MN, the bank has amassed loans and leases worth $154.1 million, including real estate loans of $123.2 million. U.S. bank customers currently have $185.5 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Premier Bank Minnesota 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 major criteria Bankrate used to grade 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 stability, capital is crucial. It works as a cushion against losses and as protection for depositors when a bank is struggling financially. When it comes to safety and soundness, the more capital, the better.

Premier Bank Minnesota received a score of 12 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.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Premier Bank Minnesota's Tier 1 capital ratio was 12.79 percent, exceeding the 6 percent level regulators consider adequate, but below the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to financial headwinds.

Overall, Premier Bank Minnesota held equity amounting to 10.22 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 impact of problem assets, such as past-due mortgages, 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 have to use capital to absorb losses, diminishing its equity buffer. Many of those assets are also likely to be in non-accrual status and thus aren't earning interest for the bank, resulting in lower earnings and potentially more risk of a future failure.

Premier Bank Minnesota came in below the national average of 37.49 on Bankrate's asset quality test, racking up 36 out of a possible 40 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, none of Premier Bank Minnesota's loans were noncurrent -- in other words, 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 troubled assets known as an "allowance for loan and lease losses." Comparing the reserve's size to the total amount of problem 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 Premier Bank Minnesota's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance has an effect on its long-term survivability. A bank can retain its earnings, increasing its capital cushion, or put them to work addressing problematic loans, likely making the bank better able to withstand economic trouble. Banks that are losing money, however, have less ability to do those things.

On Bankrate's test of earnings, Premier Bank Minnesota scored 26 out of a possible 30, beating the national average of 15.12.

Return on equity, calculated by dividing net income (essentially, profit) by the total amount of equity, is one important way to measure a bank's earnings. Premier Bank Minnesota's most recent annualized quarterly return on equity was 17.24 percent, above the national average of 8.10 percent.

The bank reported net income of $3.5 million on total equity of $21.2 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 1.72 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.