Safe and Sound

The First National Bank of Battle Lake

Battle Lake, MN
5
Star Rating
Battle Lake, MN-based The First National Bank of Battle Lake is an FDIC-insured bank started in 1907. As of December 31, 2017, the bank held equity of $10.1 million on assets of $80.6 million.

With 15 full-time employees, the bank has amassed loans and leases worth $44.7 million, including real estate loans of $36.9 million. U.S. bank customers currently have $70.3 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, The First National Bank of Battle Lake 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 key criteria Bankrate used to evaluate American banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a buffer against losses and affords protection for account holders when a bank is struggling financially. Therefore, when it comes to measuring an an institution's financial stability, capital is essential. When it comes to safety and soundness, the higher the capital, the better.

On our test to measure the adequacy of a bank's capital, The First National Bank of Battle Lake scored 16 out of a possible 30 points, beating out the national average of 13.13.

One important measure of this buffer is a bank's Tier 1 capital ratio. The First National Bank of Battle Lake's Tier 1 capital ratio was 18.91 percent, exceeding the 6 percent level considered adequate by regulators, but lower than the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather financial difficulties.

Overall, The First National Bank of Battle Lake held equity amounting to 12.57 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

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

Having large numbers of these types of assets suggests a bank may have to use capital to absorb losses, diminishing its buffer of equity. Many of those assets are also likely to be in non-accrual status and no longer earning money, pushing down earnings and increasing the risk of a failure in the future.

On Bankrate's test of asset quality, The First National Bank of Battle Lake scored 40 out of a possible 40 points, beating out the national average of 37.49 points.

The percentage of problem assets a bank holds compared to its total assets is a useful indicator of asset quality.As of December 31, 2017, 0.15 percent of The First National Bank of Battle Lake'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 problem assets known as an "allowance for loan and lease losses." The size of that reserve can be a widely used 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 The First National Bank of Battle Lake's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its long-term survivability. Earnings may be retained by the bank, boosting its capital cushion, or be used to address problematic loans, potentially making the bank better prepared to withstand financial shocks. Conversely, losses take away from a bank's ability to do those things.

On Bankrate's earnings test, The First National Bank of Battle Lake scored 22 out of a possible 30, better than the national average of 15.12.

Return on equity, calculated by dividing net income (essentially, profit) by total equity, is one important way to measure a bank's earnings. The First National Bank of Battle Lake's most recent annualized quarterly return on equity was 13.69 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $1.4 million on total equity of $10.1 million. The bank experienced an annualized return on average assets, or ROA, of 1.70 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.