Safe and Sound

First Minnetonka City Bank

Minnetonka, MN
4
Star Rating
First Minnetonka City Bank is a Minnetonka, MN-based, FDIC-insured bank founded in 1964. The bank holds equity of $22.2 million on $224.4 million in assets, according to December 31, 2017, regulatory filings.

Thanks to the work of 37 full-time employees in 4 offices in MN, the bank has amassed loans and leases worth $110.7 million, including real estate loans of $62.4 million. The bank currently holds $199.6 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, First Minnetonka City Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a breakdown of how the bank did on the three major criteria Bankrate used to score U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial fortitude, capital is essential. It acts as a bulwark against losses and affords protection for accountholders when a bank is experiencing economic instability. When looking at safety and soundness, the more capital, the better.

First Minnetonka City Bank fell short of the national average of 13.13 on our test to measure capital adequacy, achieving a score of 10 out of a possible 30 points.

One widely used measure of this buffer is a bank's Tier 1 capital ratio. First Minnetonka City Bank's Tier 1 capital ratio was 18.05 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 stand up to financial difficulties.

Overall, First Minnetonka City Bank held equity amounting to 9.89 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to try to understand how the bank's capitalization and allocated loan loss reserves could be affected by problem assets, such as unpaid loans.

Having extensive holdings of these kinds of assets means a bank may have to use capital to absorb losses, reducing its equity cushion. Many of those assets are also likely to be in non-accrual status and no longer earning money, pushing down earnings and elevating the chances of a failure in the future.

On Bankrate's test of asset quality, First Minnetonka City Bank scored 36 out of a possible 40 points, failing to reach the national average of 37.49 points.

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, 0.71 percent of First Minnetonka City Bank'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 to handle troubled assets known as an "allowance for loan and lease losses." Comparing the size of that reserve to the total amount of problematic loans can be a handy indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on First Minnetonka City Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability affects its safety and soundness. A bank can retain its earnings, giving a boost to its capital cushion, or use them to address problematic loans, potentially making the bank better prepared to withstand financial shocks. Conversely, losses reduce a bank's ability to do those things.

First Minnetonka City Bank beat the national average on Bankrate's test of earnings, achieving a score of 22 out of a possible 30.

Return on equity, calculated by dividing net income (essentially, profit) by the total amount of equity, is one important measure of a bank's earnings. The most recent annualized quarterly return on equity for First Minnetonka City Bank was 12.32 percent, above the national average of 8.10 percent.

The bank recorded net income of $2.7 million on total equity of $22.2 million for the twelve months ended December 31, 2017. The bank had 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.