Safe and Sound

Minnwest Bank

Redwood Falls, MN
4
Star Rating
Redwood Falls, MN-based Minnwest Bank is an FDIC-insured bank founded in 1941. Regulatory filings show the bank having equity of $177.6 million on assets of $1.73 billion, as of December 31, 2017.

With 308 full-time employees in 24 offices in multiple states, the bank has amassed loans and leases worth $1.42 billion, including real estate loans of $911.1 million. U.S. bank customers currently have $1.50 billion in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Minnwest Bank 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 grade American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital is an essential measurement of a bank's financial resilience. It acts as a buffer against losses and as protection for accountholders when a bank is struggling financially. When looking at safety and soundness, the more capital, the better.

On our test to measure the adequacy of a bank's capital, Minnwest Bank received a score of 12 out of a possible 30 points, below the national average of 13.13.

A bank's Tier 1 capital ratio is a commonly used measure of this buffer. Minnwest Bank's Tier 1 capital ratio was 11.34 percent, higher than the 6 percent level regulators consider adequate, but below the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to financial headwinds.

Overall, Minnwest Bank held equity amounting to 10.29 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 loan loss reserves and overall capitalization could be affected by troubled assets, such as unpaid mortgages.

Having large numbers of these types of assets could eventually force a bank to use capital to absorb losses, shrinking its equity cushion. Many of those assets are also likely to be in non-accrual status and thus aren't earning interest for the bank, pushing down earnings and increasing the chances of a future failure.

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

A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 1.16 percent of Minnwest Bank's loans were noncurrent -- in other words, they were more than 90 days past due or were in non-accrual status. That's above the national average of 1.01 percent.

Banks keep a reserve to handle troubled assets known as an "allowance for loan and lease losses." That reserve's size can be a widely used indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on Minnwest Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its safety and soundness. A bank can retain its earnings, giving a boost to its capital buffer, or use them to deal with problematic loans, likely making the bank more resilient in tough times. Conversely, losses diminish a bank's ability to do those things.

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

One important way to measure a bank's earnings is return on equity, calculated by dividing net income (profit, basically) by the total amount of equity. The most recent annualized quarterly return on equity for Minnwest Bank was 10.13 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $17.6 million on total equity of $177.6 million. The bank had an annualized return on average assets, or ROA, of 1.06 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.