Safe and Sound

The First National Bank of Osakis

Osakis, MN
5
Star Rating
The First National Bank of Osakis is an Osakis, MN-based, FDIC-insured bank founded in 1903. Regulatory filings show the bank having equity of $8.6 million on assets of $65.2 million, as of December 31, 2017.

Thanks to the work of 11 full-time employees, the bank holds loans and leases worth $36.8 million, including real estate loans of $31.3 million. The bank currently holds $53.0 million in deposits from U.S. customers.

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

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a bulwark against losses and affords protection for account holders during periods of economic instability for the bank. It follows then that when it comes to measuring an a bank's financial resilience, capital is valuable. From a safety and soundness perspective, the higher the capital, the better.

On our test to measure the adequacy of a bank's capital, The First National Bank of Osakis achieved a score of 18 out of a possible 30 points, beating out the national average of 13.13.

One commonly used measure of this buffer is a bank's Tier 1 capital ratio. The First National Bank of Osakis's Tier 1 capital ratio was 23.16 percent, above the 6 percent level considered adequate by regulators, but under the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather financial headwinds.

Overall, The First National Bank of Osakis held equity amounting to 13.12 percent of its assets, which exceeded 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 loans, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

A bank with a large number of these types of assets could eventually be required to use capital to absorb losses, decreasing its equity cushion. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, resulting in lower earnings and potentially more risk of a future failure.

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

The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of December 31, 2017, 1.35 percent of The First National Bank of Osakis's loans were noncurrent, meaning they were more than 90 days past due or were in non-accrual status. That's above 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 reserve's size to the total amount of at-risk loans can be a widely used indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on The First National Bank of Osakis'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 can be retained by the bank, giving a boost to its capital buffer, or be used to address problematic loans, likely making the bank more resilient in times of trouble. Banks that are losing money, however, have less ability to do those things.

The First National Bank of Osakis exceeded the national average on Bankrate's test of earnings, achieving a score of 18 out of a possible 30.

Return on equity, calculated by dividing net income (profit, basically) by total equity, is one key measure of a bank's earnings. The First National Bank of Osakis's most recent annualized quarterly return on equity was 9.61 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $793,000 on total equity of $8.6 million. The bank reported an annualized return on average assets, or ROA, of 1.25 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.