Safe and Sound

The First National Bank of Cokato

Cokato, MN
5
Star Rating
Started in 1916, The First National Bank of Cokato is an FDIC-insured bank headquartered in Cokato, MN. Regulatory filings show the bank having equity of $4.5 million on $59.1 million in assets, as of December 31, 2017.

Thanks to the work of 9 full-time employees, the bank has amassed loans and leases worth $36.7 million, $21.4 million of which are for real estate. U.S. bank customers currently have $54.2 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, The First National Bank of Cokato exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's an analysis of how the bank did on the three key criteria Bankrate used to grade U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a cushion against losses and provides protection for depositors during periods of financial instability for the bank. Therefore, a bank's level of capital is a key measurement of an institution's financial fortitude. From a safety and soundness perspective, the higher the capital, the better.

On our test to measure capital adequacy, The First National Bank of Cokato received a score of 6 out of a possible 30 points, coming in below 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 Cokato's Tier 1 capital ratio was 12.25 percent, above the 6 percent level regulators consider adequate, but lower than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to financial difficulties.

Overall, The First National Bank of Cokato held equity amounting to 7.63 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 unpaid mortgages, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

Having extensive holdings of these kinds of assets could eventually force a bank to use capital to cover losses, reducing 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, diminishing earnings and elevating the risk of a future failure.

The First National Bank of Cokato scored 40 out of a possible 40 points on Bankrate's asset quality test, exceeding the national average of 37.49.

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, 0.05 percent of The First National Bank of Cokato'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 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 at-risk loans can be a handy indicator when evaluating a bank's ability to manage troubled assets. The First National Bank of Cokato's loan loss allowance was 2,800.00 percent of its total noncurrent loans, exceeding the national average. All things being equal, a higher ratio of loan loss allowance to noncurrent loans is better.

Earnings score

How profitable a bank is has an effect on its safety and soundness. Earnings can be retained by the bank, boosting its capital buffer, or be used to deal with problematic loans, potentially making the bank better able to withstand financial trouble. Obviously, banks that are losing money have less ability to do those things.

The First National Bank of Cokato exceeded the national average on Bankrate's test of earnings, achieving a score of 28 out of a possible 30.

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 Cokato's most recent annualized quarterly return on equity was 19.42 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $850,000 on total equity of $4.5 million. The bank had an annualized return on average assets, or ROA, of 1.50 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.