Safe and Sound

North American Banking Company

Roseville, MN
5
Star Rating
Founded in 1998, North American Banking Company is an FDIC-insured bank based in Roseville, MN. Regulatory filings show the bank having equity of $43.3 million on $505.5 million in assets, as of December 31, 2017.

U.S. bank customers have $451.2 million on deposit at 5 offices in MN run by 64 full-time employees. With that footprint, the bank currently holds loans and leases worth $310.2 million, including $211.9 million worth of real estate loans.

Overall, Bankrate believes that, as of December 31, 2017, North American Banking Company exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for an analysis of how the bank fared on the three key criteria Bankrate used to grade U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

Capital works as a bulwark against losses and provides protection for depositors when a bank is struggling financially. It follows then that when it comes to measuring an an institution's financial stability, capital is useful. When it comes to safety and soundness, the more capital, the better.

North American Banking Company came in below the national average of 13.13 on our test to measure the adequacy of a bank's capital, receiving a score of 8 out of a possible 30 points.

One commonly used measure of this buffer is a bank's Tier 1 capital ratio. North American Banking Company's Tier 1 capital ratio was 12.13 percent, higher than the 6 percent level regulators consider adequate, but less than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to financial challenges.

Overall, North American Banking Company held equity amounting to 8.57 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to estimate the effect of troubled assets, such as past-due loans, on the bank's loan loss reserves and overall capitalization.

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

On Bankrate's asset quality test, North American Banking Company scored 40 out of a possible 40 points, beating the national average of 37.49 points.

A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.03 percent of North American Banking Company'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 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 useful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problem loans. North American Banking Company's loan loss allowance was 3,183.96 percent of its total noncurrent loans, exceeding the national average. All else being equal, the higher the ratio of loan loss allowance to noncurrent loans, the better.

Earnings score

How profitable a bank is affects its safety and soundness. Earnings may be retained by the bank, expanding its capital buffer, or be used to address problematic loans, likely making the bank better able to withstand financial trouble. Banks that are losing money, however, have less ability to do those things.

North American Banking Company scored 28 out of a possible 30 on Bankrate's test of earnings, exceeding the national average of 15.12.

One key measure of a bank's earnings is return on equity, or net income (profit, basically) divided by total equity. North American Banking Company's most recent annualized quarterly return on equity was 20.20 percent, above the national average of 8.10 percent.

The bank reported net income of $8.2 million on total equity of $43.3 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 1.82 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above 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.