Safe and Sound

AREA COMMUNITY

Grand Forks, ND
4
Star Rating
Started in 1964, AREA COMMUNITY is an NCUA-insured credit union based in Grand Forks, ND. The credit union holds $23.4 million in assets, according to June 30, 2017, regulatory filings.

With 6 full-time employees, the credit union has amassed loans and leases worth $14.3 million. AREA COMMUNITY's 2,368 members currently have $19.7 million in shares with the credit union.

Overall, Bankrate believes that, as of June 30, 2017, AREA COMMUNITY exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a look at how the credit union faired on the three key criteria Bankrate used to score U.S. credit unions.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital is a useful measurement of an institution's financial fortitude. It works as a buffer against losses and as protection for members when a credit union is struggling financially. When looking at safety and soundness, the higher the capital, the better.

On our test to measure the adequacy of a credit union's capital, AREA COMMUNITY scored 22 out of a possible 30 points, exceeding the national average of 15.26.

AREA COMMUNITY had a capitalization ratio of 16.00 percent in our test, better than the average for all credit unions, suggesting that it's stronger than its peers.

Asset Quality Score

In this test, Bankrate tries to estimate the impact of troubled assets, such as past-due mortgages, on the credit union's loan loss reserves and overall capitalization.

Having lots of these types of assets may eventually force a credit union to use capital to absorb losses, reducing its buffer of equity. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning money, resulting in depressed earnings and potentially more risk of a failure in the future.

On Bankrate's asset quality test, AREA COMMUNITY scored 36 out of a possible 40 points, falling short of the national average of 38.15 points.

A greater-than-average ratio of troubled assets of 12.00 percent in our test was a potential cause for concern for the credit union.

Earnings score

A credit union's earnings performance affects its safety and soundness. A credit union can retain its earnings, giving a boost to its capital buffer, or use them to address problematic loans, likely making the credit union better able to withstand financial trouble. Losses, on the other hand, diminish a credit union's ability to do those things.

On Bankrate's test of earnings, AREA COMMUNITY scored 10 out of a possible 30, failing to reach the national average of 10.31.

AREA COMMUNITY had an earnings ratio of 5.00 percent in our test, higher than the average for all credit unions, a sign that it's doing better than its peers in this area.

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.