Safe and Sound

Northeast Bank

Lewiston, ME
5
Star Rating
Started in 1872, Northeast Bank is an FDIC-insured bank headquartered in Lewiston, ME. As of June 30, 2017, the bank held equity of $137.6 million on $1,076,374,000 in assets.

Thanks to the efforts of 186 full-time employees in 12 offices in ME, the bank has amassed loans and leases worth $780.1 million, including $603.7 million worth of real estate loans. U.S. bank customers currently have $907.9 million in deposits with the bank.

Overall, Bankrate believes that, as of June 30, 2017, Northeast Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a look at how the bank faired on the three important criteria Bankrate used to grade American banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a cushion against losses and provides protection for accountholders when a bank is experiencing financial instability. Therefore, a bank's level of capital is an important measurement of a bank's financial fortitude. When it comes to safety and soundness, the more capital, the better.
On our test to measure the adequacy of a bank's capital, Northeast Bank racked up 16 out of a possible 30 points, exceeding the national average of 13.38.

One widely followed measure of this buffer is a bank's Tier 1 capital ratio. Northeast Bank's Tier 1 capital ratio was 17.98 percent, higher than the 6 percent level regulators consider adequate, but less than the national average of 25.16 percent. A higher capital ratio suggests the bank will be better able to stand up to economic downturns.

Overall, Northeast Bank held equity amounting to 12.79 percent of its assets, which exceeded the national average of 12.10 percent.

Asset Quality Score

Bankrate uses this test to estimate the impact of problem assets, such as unpaid mortgages, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

Having a large number of these kinds of assets means a bank may have to use capital to absorb losses, shrinking its equity cushion. Many of those assets are also likely to be in non-accrual status and no longer earning money, resulting in diminished earnings and potentially more risk of a future failure.

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

A handy indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of June 30, 2017, 1.79 percent of Northeast 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 1.04 percent.

Banks keep a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . How large that reserve is can be a helpful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on Northeast Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance has an effect on its long-term survivability. Earnings may be retained by the bank, increasing its capital cushion, or be used to deal with problematic loans, likely making the bank better prepared to withstand financial shocks. Losses, on the other hand, diminish a bank's ability to do those things.

On Bankrate's test of earnings, Northeast Bank scored 20 out of a possible 30, beating the national average of 16.52.

Return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for Northeast Bank was 11.76 percent, above the national average of 9.28 percent.

The bank reported net income of $7.9 million on total equity of $137.6 million for the twelve months ended June 30, 2017. The bank had an annualized return on average assets, or ROA, of 1.51 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.