Safe and Sound

North Star Bank

Roseville, MN
4
Star Rating
Roseville, MN-based North Star Bank is an FDIC-insured bank founded in 1947. The bank holds equity of $25.8 million on $269.2 million in assets, according to December 31, 2017, regulatory filings.

U.S. bank customers have $243.3 million on deposit at 2 offices in MN run by 47 full-time employees. With that footprint, the bank currently holds loans and leases worth $157.8 million, including real estate loans of $117.9 million.

Overall, Bankrate believes that, as of December 31, 2017, North Star Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for an analysis of how the bank did on the three key criteria Bankrate used to grade U.S. banks.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a cushion against losses and affords protection for depositors when a bank is experiencing financial instability. Therefore, a bank's level of capital is a valuable measurement of a bank's financial fortitude. When it comes to safety and soundness, the more capital, the better.

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

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. North Star Bank's Tier 1 capital ratio was 13.76 percent, higher than the 6 percent level regulators consider adequate, but below the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather economic downturns.

Overall, North Star Bank held equity amounting to 9.59 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to estimate the effect of problem assets, such as past-due mortgages, on the bank's loan loss reserves and overall capitalization.

A bank with extensive holdings of these kinds of assets could eventually be required to use capital to absorb losses, cutting down on its cushion of equity. Many of those assets are also likely to be in non-accrual status and no longer earning money, reducing earnings and elevating the chances of a failure in the future.

North Star Bank scored 28 out of a possible 40 points on Bankrate's test of asset quality, less than the national average of 37.49.

The percentage of problem assets a bank holds compared to its total assets is a handy indicator of asset quality.As of December 31, 2017, none of North Star Bank'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 to deal with problem assets known as an "allowance for loan and lease losses." That reserve's size can be a handy indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on North Star Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its long-term survivability. A bank can retain its earnings, boosting its capital cushion, or use them to address problematic loans, potentially making the bank more resilient in tough times. Conversely, losses take away from a bank's ability to do those things.

North Star Bank received above-average marks on Bankrate's test of earnings, achieving a score of 20 out of a possible 30.

One important measure of a bank's earnings is return on equity, or net income (profit, essentially) divided by the total amount of equity. The most recent annualized quarterly return on equity for North Star Bank was 11.34 percent, above the national average of 8.10 percent.

The bank recorded net income of $2.8 million on total equity of $25.8 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 1.06 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.