Safe and Sound

American Bank of the North

Nashwauk, MN
1
Star Rating
Started in 1920, American Bank of the North is an FDIC-insured bank based in Nashwauk, MN. Regulatory filings show the bank having equity of $50.5 million on $549.7 million in assets, as of December 31, 2017.

Thanks to the efforts of 160 full-time employees in 15 offices in MN, the bank has amassed loans and leases worth $433.6 million, including $311.9 million worth of real estate loans. U.S. bank customers currently have $473.7 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, American Bank of the North exhibited a significantly below-average condition, earning 1 out of 5 stars for safety and soundness. Keep reading for an analysis of how the bank did on the three important criteria Bankrate used to score U.S. banks.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

Capital acts as a buffer against losses and affords protection for depositors during periods of financial instability for the bank. It follows then that when it comes to measuring an an institution's financial resilience, capital is crucial. From a safety and soundness perspective, more capital is better.

On our test to measure capital adequacy, American Bank of the North received a score of 10 out of a possible 30 points, below the national average of 13.13.

A bank's Tier 1 capital ratio is an essential measure of this buffer. American Bank of the North's Tier 1 capital ratio was 11.02 percent, exceeding the 6 percent level considered adequate by regulators, but lower than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather financial challenges.

Overall, American Bank of the North held equity amounting to 9.18 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test is intended to estimate how the bank's loan loss reserves and overall capitalization could be affected by problem assets, such as unpaid mortgages.

A bank with extensive holdings of these types of assets could eventually be required to use capital to cover losses, decreasing its cushion of equity. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, resulting in depressed earnings and potentially more risk of a future failure.

American Bank of the North scored 16 out of a possible 40 points on Bankrate's test of asset quality, falling short of the national average of 37.49.

The percentage of problem assets a bank holds compared to its total assets is a useful indicator of asset quality.As of December 31, 2017, 4.77 percent of American Bank of the North'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 known as an "allowance for loan and lease losses" to deal with troubled assets . Comparing the size of that reserve to the total amount of problematic loans can be a useful indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on American Bank of the North's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money affects its safety and soundness. A bank can retain its earnings, expanding its capital buffer, or put them to work addressing problematic loans, potentially making the bank more resilient in tough times. Banks that are losing money, however, are less able to do those things.

American Bank of the North underperformed the average on Bankrate's earnings test, achieving a score of 2 out of a possible 30.

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. American Bank of the North's most recent annualized quarterly return on equity was 0.17 percent, below the national average of 8.10 percent.

The bank earned net income of $88,000 on total equity of $50.5 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 0.02 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below 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.