Safe and Sound

The First National Bank of Le Center

Le Center, MN
5
Star Rating
The First National Bank of Le Center is a Le Center, MN-based, FDIC-insured bank founded in 1903. The bank holds equity of $11.9 million on assets of $93.8 million, according to December 31, 2017, regulatory filings.

Thanks to the efforts of 17 full-time employees, the bank has amassed loans and leases worth $69.3 million, $43.8 million of which are for real estate. The bank currently holds $80.2 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, The First National Bank of Le Center exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a breakdown of how the bank did on the three key criteria Bankrate used to grade American banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a buffer against losses and as protection for account holders when a bank is experiencing financial trouble. Therefore, when it comes to measuring an a bank's financial fortitude, capital is valuable. When looking at safety and soundness, the more capital, the better.

On our test to measure capital adequacy, The First National Bank of Le Center scored 16 out of a possible 30 points, beating out the national average of 13.13.

One widely used measure of this buffer is a bank's Tier 1 capital ratio. The First National Bank of Le Center's Tier 1 capital ratio was 18.70 percent, exceeding the 6 percent level considered adequate by regulators, but less than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to economic downturns.

Overall, The First National Bank of Le Center held equity amounting to 12.64 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to estimate the impact of problem assets, such as unpaid loans, on the bank's loan loss reserves and overall capitalization.

Having extensive holdings of these types of assets could eventually force a bank to use capital to cover losses, shrinking its buffer of equity. Many of those assets are also likely to be in non-accrual status and no longer earning money, diminishing earnings and increasing the chances of a failure in the future.

The First National Bank of Le Center scored below the national average of 37.49 on Bankrate's test of asset quality, racking up 36 out of a possible 40 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, 0.23 percent of The First National Bank of Le Center'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 problem assets known as an "allowance for loan and lease losses." How large that reserve is can be a helpful 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 Le Center's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance has an effect on its long-term survivability. Earnings may be retained by the bank, boosting its capital buffer, or be used to deal with problematic loans, likely making the bank better able to withstand economic shocks. Losses, on the other hand, lessen a bank's ability to do those things.

The First National Bank of Le Center scored 20 out of a possible 30 on Bankrate's earnings test, beating out the national average of 15.12.

Return on equity, calculated by dividing net income (profit, basically) by total equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for The First National Bank of Le Center was 11.86 percent, above the national average of 8.10 percent.

The bank reported net income of $1.4 million on total equity of $11.9 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 1.53 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.