Introduction to Produce State Bank

Established almost a century ago, Produce State Bank is a relatively small bank that was founded in the year 1926. The bank’s main office is located in the state of Minnesota and this is also the only state in which the bank operates. The Federal Deposit Insurance Corporation has provided insurance to the bank since 1934. The FDIC is one of two governmental agencies that provides deposit insurance to American depositary institutions – the other is the National Credit Union Administration (NCUA). The FDIC’s mandate is mainly to insure deposits, but the agency also examines and supervises financial institutions and manages receiverships. The FDIC is also serves as the primary federal regulator for the bank. Mainly because of its relative size, geographic reach and presence, the bank is considered to be a community bank, instead of a national bank. Based on our estimates, we believe its asset base of $123 million ranks it in the 20th percentile of banks in the United States. Produce State Bank does not currently have any offices located outside of the United States, and functionally is a domestic bank. Within the U.S., the bank currently has 4 offices. As of this writing, the bank employed a total of 19 people.

Details on the Bank’s Asset Composition

As noted earlier, the bank has total assets of $123 million. In addition, the bank has a deposit base of $113 million and net loans outstanding of $53 million. Domestic deposits currently represent (in terms of total size), 92% of the bank’s total assets, and 100% of the bank’s total deposits outstanding. Within these deposits 89% are insured based on the latest available information. Looking at the asset side of the balance sheet, 44% of the bank’s total asset base consisted of loans to customers (keep in mind that this is on a gross basis). Loans for real estate purposes alone comprised 54% of the outstanding loans. Produce State Bank has $5 million of outstanding 1-4 family residential loans (mortgages), which in total represents 9% of its loans outstanding. Loans to individuals and loans to commercial and industrial interests represent 9% and 25% of loans outstanding, respectively. Loans to farmland and farms represents 29% of loans outstanding.

Contact Information For Produce State Bank

  • Main Office Address: 109 Park Ave W, Hollandale, MN 56045
  • Website: www.producestatebank.com
  • Total Number of Branches: 4
  • Total Number of International Branches: None
  • Number of Employees: 19
  • FDIC Certificate Number: 10178
  • FDIC Community Bank: Yes
  • FDIC Field Office: Minneapolis
  • Independent or Subsidiary Bank: Independent
  • Federal Reserve ID Number: 24659
  • Bank Charter Class: NM
  • Primary Regulator: FDIC

Financial Overview

produce state bank-financial-metrics-sept-21

The bank had total assets of $123 million based on the latest available information. Its total assets have increased substantially over the past year, with an increase of 14.3%. Moving to the other side of the balance sheet, we see net loans of $53 million which compares with $57 million in the prior year. Therefore its clear that over the past year the bank’s net loans outstanding has reported a decrease of 6.3%. Taking a closer look at the bank’s loan portfolio, we see that residential mortgages comprise 9% of the bank’s loan book. The bank has $5 million of residential mortgages outstanding, which compares with $5 million in the prior year. This implies an increase of 0.1% over the past year. In addition, the bank provides loans to commercial and industrial businesses, which represents 24.6% of its total lending and stood at $13 million based on the latest available information. The bank also provides loans for farm-related activities, which currently amounts to 28.7% of its total loan portfolio. Credit card-related lending represents 0.0% of the banks total lending. This represents the outstanding balance of credit cards that the bank has issued to its customers. Finally, the bank also engages in the provision of auto loans. These are loans provided to customers to help finance vehicle purchases. Auto loans represent 5.2% of the bank’s total lending.

Bank Liquidity and Funding

Liquidity and funding are two important considerations when evaluating a bank. It gives us a sense of how a bank finances its activities and can help both depositors and customers better understand a banks financial positioning. Oftentimes one of the cheapest forms of funding is customer deposits. Produce State Bank has total customer deposits outstanding of $113 million. The bank’s deposit base has increased substantially over the past year, growing 15.6%. The average bank in the country has a loan to deposit ratio of approximately 82%. In comparison, Produce State Bank has a loan to deposit ratio of 47% which is significantly below the average. A lower ratio is generally better as it indicates that the lending activities of a bank are more comfortably covered by its deposit base. Deposits, as noted earlier, are usually a cost effective source of financing. All of the bank’s deposits are sourced from domestic depositors, which is helpful from a risk assessment standpoint.

Bank Performance and Capital Metrics

produce state bank-performance-metrics-sept-21

The above chart provides a brief summary of some of the key performance metrics for Produce State Bank. Next to these metrics are the equivalent for the average U.S. bank. When it comes to the bank’s return on assets, over the past year it has declined. Importantly, on this metric we can also see that the bank is below the average bank. Return on assets tells us how productive a bank is being with its asset base. Moving on to the bank’s return on equity, which tells us how much of a return the bank has generated for its owners, over the past year it has improved. In addition, we can also see that the bank is above the average bank on this metric. The bank’s total leverage ratio has declined over the past year and is currently below the national average. Finally, Produce State Bank’s Tier 1 capital ratio has improved over the past year. On this metric the bank is below the national average.

Concluding Comments on Produce State Bank

Overall, we believe Produce State Bank deserves a rating of 3.5 out of 5.0, which is a very good rating. There are many factors that go into the calculation of our rating and almost all banks will have both positive and negative contributors. As an example, Produce State Bank scores well on its cost of funds, which is above the national average. However when we consider the bank’s net interest margin, the bank does not have a good score mainly because it is below the national average which impacts its rating. Finally, please note that the rating information is based on our proprietary scoring system. This system was developed by us and leverages data from a nationwide bank study. Importantly, keep in mind that none of the work presented is intended to be investment advice or advice of any sort and is presented purely for informational purposes.