Safe and Sound

Village Bank

Saint Francis, MN
4
Star Rating
Saint Francis, MN-based Village Bank is an FDIC-insured bank founded in 1993. The bank holds equity of $22.3 million on $282.8 million in assets, according to December 31, 2017, regulatory filings.

U.S. bank customers have $242.4 million on deposit at 4 offices in MN run by 61 full-time employees. With that footprint, the bank currently holds loans and leases worth $220.1 million, including $168.4 million worth of real estate loans.

Overall, Bankrate believes that, as of December 31, 2017, Village Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's an analysis of how the bank fared on the three key criteria Bankrate used to evaluate U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a bulwark against losses and as protection for account holders when a bank is struggling financially. Therefore, a bank's level of capital is an important measurement of a bank's financial strength. When it comes to safety and soundness, the more capital, the better.

Village Bank fell below the national average of 13.13 on our test to measure capital adequacy, achieving a score of 6 out of a possible 30 points.

A bank's Tier 1 capital ratio is an essential measure of this buffer. Village Bank's Tier 1 capital ratio was 9.73 percent, exceeding 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 stand up to financial headwinds.

Overall, Village Bank held equity amounting to 7.87 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 troubled assets, such as past-due loans, on the bank's capitalization and allocated loan loss reserves.

A bank with a large number of these kinds of assets may eventually be required 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 interest for the bank, resulting in reduced earnings and potentially more risk of a failure in the future.

Village Bank finished below the national average of 37.49 on Bankrate's asset quality test, racking up 32 out of a possible 40 points .

The percentage of problem assets a bank holds compared to its total assets is a handy indicator of asset quality.As of December 31, 2017, 1.49 percent of Village Bank's loans were noncurrent -- in other words, 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 keep a reserve to handle problem assets known as an "allowance for loan and lease losses." The size of that reserve can be a useful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on Village Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its long-term survivability. Earnings may be retained by the bank, expanding its capital cushion, or be used to deal with problematic loans, potentially making the bank better prepared to withstand economic shocks. Obviously, banks that are losing money have less ability to do those things.

Village Bank outperformed the average on Bankrate's test of earnings, achieving a score of 30 out of a possible 30.

Return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity, is one important way to measure a bank's earnings. Village Bank's most recent annualized quarterly return on equity was 20.52 percent, above the national average of 8.10 percent.

The bank reported net income of $4.5 million on total equity of $22.3 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 1.71 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.