Safe and Sound

The State Bank of Faribault

Faribault, MN
5
Star Rating
The State Bank of Faribault is an FDIC-insured bank started in 1919 and currently based in Faribault, MN. The bank has equity of $21.4 million on assets of $198.5 million, according to December 31, 2017, regulatory filings.

Thanks to the efforts of 46 full-time employees in 2 offices in MN, the bank has amassed loans and leases worth $117.7 million, including $94.8 million worth of real estate loans. The bank currently holds $175.5 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, The State Bank of Faribault exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a look at how the bank did on the three key criteria Bankrate used to evaluate U.S. banks on safety and soundness.

WHAT IS
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THE INSTITUTION'S SCORE

Capital Score

Capital is an essential measurement of an institution's financial resilience. It works as a cushion against losses and as protection for accountholders when a bank is struggling financially. From a safety and soundness perspective, more capital is preferred.

The State Bank of Faribault received a score of 12 out of a possible 30 points on our test to measure the adequacy of a bank's capital, lower than the national average of 13.13.

A bank's Tier 1 capital ratio is a widely used measure of this buffer. The State Bank of Faribault's Tier 1 capital ratio was 13.31 percent, above the 6 percent level regulators consider adequate, but less than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather financial difficulties.

Overall, The State Bank of Faribault held equity amounting to 10.77 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to determine the impact of problem assets, such as past-due loans, on the bank's loan loss reserves and overall capitalization.

A bank with lots of these types of assets could eventually have to use capital to cover losses, diminishing its buffer of equity. It also means that there are likely to be many assets that are in non-accrual status and no longer earning interest for the bank, diminishing earnings and increasing the risk of a failure in the future.

The State Bank of Faribault did better than the national average of 37.49 on Bankrate's test of asset quality, racking up 40 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, 0.09 percent of The State Bank of Faribault'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 . That reserve's size 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. The State Bank of Faribault's loan loss allowance was 1,978.90 percent of its total noncurrent loans, above the national average. All things being equal, the higher the ratio of loan loss allowance to noncurrent loans, the better.

Earnings score

A bank's profitability affects its safety and soundness. A bank can retain its earnings, expanding its capital buffer, or use them to address problematic loans, potentially making the bank better able to withstand financial shocks. Obviously, banks that are losing money are less able to do those things.

The State Bank of Faribault beat the national average on Bankrate's earnings test, 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 important way to measure a bank's earnings. The most recent annualized quarterly return on equity for The State Bank of Faribault was 10.12 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $2.1 million on total equity of $21.4 million. The bank had an annualized return on average assets, or ROA, of 1.12 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.