Safe and Sound

Minnstar Bank National Association

Lake Crystal, MN
4
Star Rating
Founded in 1934, Minnstar Bank National Association is an FDIC-insured bank based in Lake Crystal, MN. As of December 31, 2017, the bank held equity of $11.6 million on $143.4 million in assets.

U.S. bank customers have $124.4 million on deposit at 2 offices in MN run by 27 full-time employees. With that footprint, the bank holds loans and leases worth $105.2 million, including $78.3 million worth of real estate loans.

Overall, Bankrate believes that, as of December 31, 2017, Minnstar Bank National Association 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 major criteria Bankrate used to evaluate American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a cushion against losses and affords protection for depositors when a bank is struggling financially. It follows then that when it comes to measuring an an institution's financial stability, capital is valuable. When it comes to safety and soundness, the higher the capital, the better.

Minnstar Bank National Association received a score of 8 out of a possible 30 points on our test to measure the adequacy of a bank's capital, below the national average of 13.13.

A bank's Tier 1 capital ratio is a widely followed measure of this buffer. Minnstar Bank National Association's Tier 1 capital ratio was 11.37 percent, above the 6 percent level considered adequate by regulators, but less than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to financial difficulties.

Overall, Minnstar Bank National Association held equity amounting to 8.12 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to estimate the effect of troubled assets, such as unpaid loans, on the bank's capitalization and allocated loan loss reserves.

Having large numbers of these kinds of assets means a bank could have to use capital to cover losses, decreasing its equity cushion. It also means that there are likely to be many assets that are in non-accrual status and no longer earning interest for the bank, diminishing earnings and increasing the chances of a failure in the future.

On Bankrate's test of asset quality, Minnstar Bank National Association scored 32 out of a possible 40 points, lower than the national average of 37.49 points.

The percentage of problem assets a bank holds compared to its total assets is a useful indicator of asset quality.As of December 31, 2017, 0.52 percent of Minnstar Bank National Association'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 maintain a reserve to handle problem assets known as an "allowance for loan and lease losses." Comparing the reserve's size to the total amount of problematic loans can be a useful indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Minnstar Bank National Association's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability affects its safety and soundness. Earnings may be retained by the bank, expanding its capital cushion, or be used to address problematic loans, likely making the bank more resilient in tough times. Banks that are losing money, however, have less ability to do those things.

Minnstar Bank National Association did above-average on Bankrate's earnings test, achieving a score of 20 out of a possible 30.

One key way to measure a bank's earnings is return on equity, or net income (profit, essentially) divided by total equity. Minnstar Bank National Association's most recent annualized quarterly return on equity was 11.48 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $1.3 million on total equity of $11.6 million. The bank experienced an annualized return on average assets, or ROA, of 0.98 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.