Safe and Sound

Minnesota Bank & Trust

Edina, MN
5
Star Rating
Minnesota Bank & Trust is an Edina, MN-based, FDIC-insured bank started in 2008. The bank has equity of $21.7 million on $210.2 million in assets, according to December 31, 2017, regulatory filings.

With 26 full-time employees, the bank has amassed loans and leases worth $139.9 million, including real estate loans of $76.0 million. U.S. bank customers currently have $178.0 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Minnesota Bank & Trust exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a look at how the bank did on the three major criteria Bankrate used to grade U.S. banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

Capital is an important measurement of a bank's financial fortitude. It works as a bulwark against losses and affords protection for depositors when a bank is struggling financially. From a safety and soundness perspective, the higher the capital, the better.

Minnesota Bank & Trust received a score of 12 out of a possible 30 points on our test to measure capital adequacy, less than the national average of 13.13.

A bank's Tier 1 capital ratio is a commonly used measure of this buffer. Minnesota Bank & Trust's Tier 1 capital ratio was 13.06 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, Minnesota Bank & Trust held equity amounting to 10.32 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test is intended to try to understand how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by troubled assets, such as past-due mortgages.

Having lots of these kinds of assets may eventually force a bank to use capital to absorb losses, diminishing its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning money, reducing earnings and increasing the risk of a failure in the future.

On Bankrate's asset quality test, Minnesota Bank & Trust scored 40 out of a possible 40 points, above the national average of 37.49 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, 0.02 percent of Minnesota Bank & Trust'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 deal with troubled assets known as an "allowance for loan and lease losses." Comparing the size of that reserve to the total amount of problem loans can be a helpful indicator when evaluating a bank's ability to manage troubled assets. Minnesota Bank & Trust's loan loss allowance was 3,547.06 percent of its total noncurrent loans, exceeding the national average. All things being equal, a higher ratio of loan loss allowance to noncurrent loans is better.

Earnings score

A bank's profitability has an effect on its long-term survivability. Earnings may be retained by the bank, boosting its capital cushion, or be used to deal with problematic loans, potentially making the bank better able to withstand financial shocks. Conversely, losses take away from a bank's ability to do those things.

Minnesota Bank & Trust scored 18 out of a possible 30 on Bankrate's test of earnings, beating the national average of 15.12.

One widely used way to measure a bank's earnings is return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity. The most recent annualized quarterly return on equity for Minnesota Bank & Trust was 9.98 percent, above the national average of 8.10 percent.

The bank earned net income of $2.0 million on total equity of $21.7 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 0.94 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.