Safe and Sound

Northeast Bank

Lewiston, ME
5
Star Rating
Northeast Bank is a Lewiston, ME-based, FDIC-insured bank that opened its doors in 1872. As of December 31, 2017, the bank held equity of $145.8 million on $1.04 billion in assets.

Thanks to the efforts of 183 full-time employees in 12 offices in ME, the bank holds loans and leases worth $776.0 million, $597.6 million of which are for real estate. U.S. bank customers currently have $868.1 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Northeast 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 important criteria Bankrate used to grade American banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial fortitude, capital is key. It acts as a cushion against losses and provides protection for depositors during times of economic trouble for the bank. From a safety and soundness perspective, the more capital, the better.

On our test to measure capital adequacy, Northeast Bank racked up 18 out of a possible 30 points, better than the national average of 13.19.

A bank's Tier 1 capital ratio is an essential measure of this buffer. Northeast Bank's Tier 1 capital ratio was 18.77 percent, above the 6 percent level considered adequate by regulators, but below the national average of 25.67 percent. The higher the capital ratio, the better the bank will be able to stand up to economic challenges.

Overall, Northeast Bank held equity amounting to 14.07 percent of its assets, which exceeded the national average of 12.04 percent.

Asset Quality Score

Bankrate uses this test to estimate the effect of troubled assets, such as unpaid mortgages, on the bank's capitalization and allocated loan loss reserves.

A bank with lots of these types of assets could eventually be required to use capital to cover losses, cutting down on its equity cushion. 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, resulting in diminished earnings and potentially more risk of a failure in the future.

Northeast Bank fell below the national average of 37.70 on Bankrate's asset quality test, racking up 36 out of a possible 40 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, 2.32 percent of Northeast Bank'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 1.14 percent.

Banks keep a reserve to handle troubled assets known as an "allowance for loan and lease losses." The size of that reserve can be a useful 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 Northeast Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its long-term survivability. Earnings can be retained by the bank, giving a boost to its capital cushion, or be used to deal with problematic loans, potentially making the bank more resilient in times of trouble. However, banks that are losing money have less ability to do those things.

Northeast Bank exceeded the national average on Bankrate's earnings test, achieving a score of 20 out of a possible 30.

Return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity, is one key measure of a bank's earnings. The most recent annualized quarterly return on equity for Northeast Bank was 11.60 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $16.0 million on total equity of $145.8 million. The bank had an annualized return on average assets, or ROA, of 1.54 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.