Safe and Sound

Flagship Bank Minnesota

Wayzata, MN
3
Star Rating
Flagship Bank Minnesota is an FDIC-insured bank started in 1875 and currently based in Wayzata, MN. Regulatory filings show the bank having equity of $22.1 million on assets of $204.7 million, as of December 31, 2017.

With 45 full-time employees in 6 offices in MN, the bank has amassed loans and leases worth $163.2 million, including real estate loans of $146.2 million. U.S. bank customers currently have $173.3 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Flagship Bank Minnesota exhibited a generally satisfactory condition, earning 3 out of 5 stars for safety and soundness. Keep reading for an analysis of how the bank fared on the three key criteria Bankrate used to evaluate American banks.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial stability, capital is valuable. It works as a cushion against losses and provides protection for accountholders during periods of financial trouble for the bank. When it comes to safety and soundness, more capital is better.

Flagship Bank Minnesota finished below the national average of 13.13 on our test to measure capital adequacy, scoring 12 out of a possible 30 points.

One widely followed measure of this buffer is a bank's Tier 1 capital ratio. Flagship Bank Minnesota's Tier 1 capital ratio was 12.18 percent, higher than the 6 percent level regulators consider adequate, but under the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to economic difficulties.

Overall, Flagship Bank Minnesota held equity amounting to 10.78 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test is intended to estimate how the bank's capitalization and allocated loan loss reserves could be affected by troubled assets, such as unpaid loans.

Having extensive holdings of these kinds of assets could eventually require a bank to use capital to absorb losses, diminishing its cushion of equity. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning money, resulting in depressed earnings and potentially more risk of a future failure.

Flagship Bank Minnesota scored below the national average of 37.49 on Bankrate's test of asset quality, racking up 36 out of a possible 40 points .

A handy indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.73 percent of Flagship Bank Minnesota's loans were noncurrent -- in other words, 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 keep a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . How large that reserve is can be a helpful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on Flagship Bank Minnesota's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability has an effect on its safety and soundness. A bank can retain its earnings, giving a boost to its capital cushion, or put them to work addressing problematic loans, likely making the bank better able to withstand economic shocks. Losses, on the other hand, lessen a bank's ability to do those things.

Flagship Bank Minnesota fell behind the national average on Bankrate's test of earnings, achieving a score of 4 out of a possible 30.

One widely used measure of a bank's earnings is return on equity, calculated by dividing net income (profit, essentially) by total equity. Flagship Bank Minnesota's most recent annualized quarterly return on equity was 1.96 percent, below the national average of 8.10 percent.

The bank recorded net income of $440,000 on total equity of $22.1 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 0.22 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below 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.