Safe and Sound

Bank Northwest

Hamilton, MO
5
Star Rating
Bank Northwest is an FDIC-insured bank founded in 1945 and currently based in Hamilton, MO. As of June 30, 2017, the bank had equity of $10.7 million on $123,322,000 in assets.

Thanks to the efforts of 28 full-time employees in 5 offices in MO, the bank currently holds loans and leases worth $86.1 million, including $57.4 million worth of real estate loans. The bank currently holds $112.4 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of June 30, 2017, Bank Northwest exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a breakdown of how the bank did on the three major criteria Bankrate used to evaluate U.S. banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial strength, capital is crucial. It acts as a buffer against losses and as protection for accountholders during periods of financial instability for the bank. From a safety and soundness perspective, the more capital, the better.
Bank Northwest received a score of 8 out of a possible 30 points on our test to measure the adequacy of a bank's capital, lower than the national average of 13.38.

One essential measure of this buffer is a bank's Tier 1 capital ratio. Bank Northwest's Tier 1 capital ratio was 11.75 percent, above the 6 percent level regulators consider adequate, but less than the national average of 25.16 percent. The higher the capital ratio, the better the bank will be able to stand up to financial downturns.

Overall, Bank Northwest held equity amounting to 8.66 percent of its assets, which was lower than the national average of 12.10 percent.

Asset Quality Score

In this test, Bankrate tries to determine the impact of troubled assets, such as unpaid mortgages, on the bank's capitalization and allocated loan loss reserves.

Having lots of these kinds of assets could eventually force a bank to use capital to cover losses, cutting down on its cushion of equity. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, resulting in lower earnings and potentially more risk of a failure in the future.

Bank Northwest scored 36 out of a possible 40 points on Bankrate's test of asset quality, less than the national average of 37.62.

The percentage of problem assets a bank holds compared to its total assets is a widely used indicator of asset quality.As of June 30, 2017, 1.15 percent of Bank Northwest's loans were noncurrent, meaning they were more than 90 days past due or were in non-accrual status. That's above the national average of 1.04 percent.

Banks keep a reserve known as an "allowance for loan and lease losses" to deal with problem assets . How large that reserve is can be a handy 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 Bank Northwest's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its safety and soundness. Earnings can be retained by the bank, expanding its capital buffer, or be used to deal with problematic loans, likely making the bank more resilient in tough times. Banks that are losing money, however, have less ability to do those things.

On Bankrate's earnings test, Bank Northwest scored 30 out of a possible 30, above the national average of 16.52.

One key measure of a bank's earnings is return on equity, or net income (profit, basically) divided by the total amount of equity. Bank Northwest's most recent annualized quarterly return on equity was 22.98 percent, above the national average of 9.28 percent.

For the twelve months ended June 30, 2017, the bank reported net income of $1.2 million on total equity of $10.7 million. The bank experienced an annualized return on average assets, or ROA, of 1.92 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above the average for U.S. banks of 1.14 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.