Minnstar Bank: Overview of the bank

The Minnstar Bank is a relatively small bank whose main office is based in the state of Minnesota. The bank is primarily engaged in providing 1-4 family residential loans (mortgages) to its customers, but also provides commercial & industrial loans. The bank was founded in the year 1934. The bank first got insured by the Federal Deposit Insurance Corporation in the year 1934 which is effectively the first year it was possible to get insured by the agency, which itself was founded in the prior year.  Mainly because of its relative size, geographic reach and presence, the bank is considered to be a community bank, instead of a national bank. Based on our estimates, we believe its asset base of $168 million ranks it in the 30th percentile of banks in the United States. Minnstar Bank does not currently have any offices located outside of the United States, and functionally is a domestic bank. Within the U.S., the bank currently has 2 offices. Finally, the bank currently has a total employee base of 24 people.

Discussion of the key components of the Bank’s Balance Sheet

As previously indicated, the bank currently has total assets of $168 million, which makes it a relatively small bank in the United States. The bank also has net loans outstanding to customers of $118 million and a deposit base of $146 million. Approximately 51% of the bank’s deposits outstanding were transactional deposits, while domestic depositors made up 100% of the bank’s total deposit base. 83% of the domestic deposits outstanding are insured. Looking at the asset side of the balance sheet, 71% of the bank’s total asset base consisted of loans to customers (keep in mind that this is on a gross basis). Loans for real estate purposes alone comprised 73% of the outstanding loans. Minnstar Bank has $22 million of outstanding 1-4 family residential loans (mortgages), which in total represents 18% of its loans outstanding. Loans to individuals and loans to commercial and industrial interests represent 1% and 16% of loans outstanding, respectively. Loans to farmland and farms represents 13% of loans outstanding.

Contact Information For Minnstar Bank

  • Main Office Address: 202 N. Main St., Lake Crystal, MN 56055
  • Website: www.minnstarbank.com
  • Total Number of Branches: 2
  • Total Number of International Branches: None
  • Number of Employees: 24
  • FDIC Certificate Number: 13809
  • FDIC Community Bank: Yes
  • FDIC Field Office: Mankato
  • Independent or Subsidiary Bank: Independent
  • Federal Reserve ID Number: 89854
  • Bank Charter Class: N
  • Primary Regulator: OCC

Financial Overview

minnstar bank-financial-metrics-sept-21

Minnstar Bank has total assets of $168 million and over the past year its asset base has increased substantially, reporting an increase of 14.5%. In terms of the bank’s lending activities, net loans represented 70.4% of its total assets, and stood at $118 million. The bank’s loan portfolio has decreased slightly over the past year, with a decrease of 1.7%. Residential mortgages comprise 18% of the outstanding loans of the bank. The outstanding balance of residential mortgages has decreased over the past year by 15.6%. In addition, the bank provides loans to commercial and industrial businesses, which represents 16.5% of its total lending and stood at $20 million based on the latest available information. The bank also provides loans for farm-related activities, which currently amounts to 12.9% of its total loan portfolio. Finally, the bank also engages in the provision of auto loans. These are loans provided to customers to help finance vehicle purchases. Auto loans represent 0.2% of the bank’s total lending.

Bank Liquidity and Funding

How a bank funds its activities is an important area to assess and monitor. As a depositor you want to make sure the bank is conservatively funded, and the same goes for customers. Oftentimes one of the cheapest forms of funding is customer deposits. Minnstar Bank has total customer deposits outstanding of $146 million. The bank’s deposit base has increased substantially over the past year, growing 17.1%. The average bank in the country has a loan to deposit ratio of approximately 82%. In comparison, Minnstar Bank has a loan to deposit ratio of 81% which is below the average. A lower ratio is generally better as it indicates that the lending activities of a bank are more comfortably covered by its deposit base. Deposits, as noted earlier, are usually a cost effective source of financing. Effectively all of the bank’s deposit base is funded by domestic sources.

Bank Performance and Capital Metrics

minnstar bank-performance-metrics-sept-21

Above we have shown a summary of some of the performance metrics for Minnstar Bank compared with the average U.S. bank. Starting with its return on assets, over the past year it has declined. Importantly, on this metric we can also see that the bank is above the average bank. Return on assets tells us how productive a bank is being with its asset base. Moving on to the bank’s return on equity, which tells us how much of a return the bank has generated for its owners, over the past year it has declined. In addition, we can also see that the bank is above the average bank on this metric. Another metric that is helpful in contextualizing a bank’s return on equity is its leverage ratio. A lower ratio means that the bank has a higher reliance on borrowing to deliver its return on equity. In this case, the total leverage ratio is currently below the average U.S. bank, and has declined over the past year. Finally, Minnstar Bank’s Tier 1 capital ratio has improved over the past year. On this metric the bank is below the national average.

Conclusion: Minnstar Bank

Overall, we believe Minnstar Bank deserves a rating of 3.6 out of 5.0, which is a very good rating. Specifically, an area of strength for the bank would be its net interest margin which is above the national average. On the contrary, the bank’s tier 1 capital is one of the primary drawbacks on its rating as on this metric, the bank is below average. Importantly, please be aware that none of the information presented is meant to be investment advice or advice of any form. All of the information and views expressed in this note and on this site are purely for informational purposes.