Safe and Sound

Neighborhood National Bank

Mora, MN
5
Star Rating
Neighborhood National Bank is an FDIC-insured bank founded in 1963 and currently headquartered in Mora, MN. Regulatory filings show the bank having equity of $23.8 million on assets of $217.7 million, as of December 31, 2017.

U.S. bank customers have $190.6 million on deposit at 6 offices in MN run by 62 full-time employees. With that footprint, the bank has amassed loans and leases worth $145.9 million, $107.9 million of which are for real estate.

Overall, Bankrate believes that, as of December 31, 2017, Neighborhood National Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a look at how the bank fared on the three major criteria Bankrate used to evaluate U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

Capital is a crucial measurement of an institution's financial strength. It works as a buffer against losses and affords protection for depositors during times of economic trouble for the bank. From a safety and soundness perspective, the higher the capital, the better.

Neighborhood National Bank received a score of 12 out of a possible 30 points on our test to measure capital adequacy, coming in below the national average of 13.13.

One widely used measure of this buffer is a bank's Tier 1 capital ratio. Neighborhood National Bank's Tier 1 capital ratio was 15.43 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 stand up to economic headwinds.

Overall, Neighborhood National Bank held equity amounting to 10.95 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 capitalization and allocated loan loss reserves could be affected by problem assets, such as past-due loans.

Having a large number of these kinds of assets may eventually force a bank to use capital to cover losses, shrinking its buffer of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning interest for the bank, resulting in lower earnings and potentially more risk of a future failure.

Neighborhood National Bank did better than the national average of 37.49 on Bankrate's asset quality test, racking up 40 out of a possible 40 points .

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, 0.39 percent of Neighborhood National Bank's loans were noncurrent -- in other words, they were more than 90 days past due or were in non-accrual status. That's below the national average of 1.01 percent.

Banks maintain a reserve known as an "allowance for loan and lease losses" to deal with problem assets . How large that reserve is can be a helpful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on Neighborhood National Bank'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, giving a boost to its capital buffer, or use them to address problematic loans, likely making the bank more resilient in tough times. Banks that are losing money, however, have less ability to do those things.

Neighborhood National Bank outperformed the average on Bankrate's test of earnings, achieving a score of 18 out of a possible 30.

Return on equity, calculated by dividing net income (profit, basically) 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 Neighborhood National Bank was 8.83 percent, above the national average of 8.10 percent.

The bank reported net income of $2.1 million on total equity of $23.8 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 1.00 percent, right at the level deemed satisfactory in accordance with industry standards, and equal to 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.