Safe and Sound

North Shore Bank of Commerce

Duluth, MN
4
Star Rating
Started in 1915, North Shore Bank of Commerce is an FDIC-insured bank headquartered in Duluth, MN. The bank has equity of $22.5 million on assets of $282.9 million, according to December 31, 2017, regulatory filings.

With 110 full-time employees in 7 offices in MN, the bank has amassed loans and leases worth $178.8 million, including real estate loans of $156.5 million. U.S. bank customers currently have $255.6 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, North Shore Bank of Commerce exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a look at how the bank fared on the three major criteria Bankrate used to score U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial resilience, capital is essential. It acts as a cushion against losses and affords protection for accountholders when a bank is struggling financially. From a safety and soundness perspective, more capital is better.

North Shore Bank of Commerce received a score of 6 out of a possible 30 points on our test to measure capital adequacy, failing to reach the national average of 13.13.

A bank's Tier 1 capital ratio is a commonly used measure of this buffer. North Shore Bank of Commerce's Tier 1 capital ratio was 14.46 percent, higher than the 6 percent level considered adequate by regulators, 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 economic downturns.

Overall, North Shore Bank of Commerce held equity amounting to 7.94 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

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

A bank with extensive holdings of these kinds of assets may eventually be forced to use capital to cover losses, diminishing its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning interest for the bank, reducing earnings and elevating the risk of a failure in the future.

North Shore Bank of Commerce scored above 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 widely used indicator of asset quality.As of December 31, 2017, 0.63 percent of North Shore Bank of Commerce's loans were noncurrent, meaning 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 . Comparing how large that reserve is to the total amount of at-risk loans can be a widely used indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on North Shore Bank of Commerce'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, giving a boost to its capital buffer, or be used to address problematic loans, likely making the bank more resilient in times of trouble. However, banks that are losing money have less ability to do those things.

North Shore Bank of Commerce scored 22 out of a possible 30 on Bankrate's earnings test, better than the national average of 15.12.

Return on equity, calculated by dividing net income (profit, basically) by total equity, is one important way to measure a bank's earnings. North Shore Bank of Commerce's most recent annualized quarterly return on equity was 14.72 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $3.0 million on total equity of $22.5 million. The bank reported an annualized return on average assets, or ROA, of 1.08 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.