Safe and Sound

Northeast Bank

Lewiston, ME
5
Star Rating
Northeast Bank is an FDIC-insured bank founded in 1872 and currently headquartered in Lewiston, ME. Regulatory filings show the bank having equity of $145.8 million on $1.04 billion in assets, as of December 31, 2017.

U.S. bank customers have $868.1 million on deposit at 12 offices in ME run by 183 full-time employees. With that footprint, the bank has amassed loans and leases worth $776.0 million, including $597.6 million worth of real estate loans.

Overall, Bankrate believes that, as of December 31, 2017, Northeast Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a look at how the bank fared on the three key criteria Bankrate used to score American banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital is an important measurement of an institution's financial resilience. It acts as a buffer against losses and as protection for accountholders when a bank is struggling financially. From a safety and soundness perspective, more capital is better.

Northeast Bank scored 18 out of a possible 30 points on our test to measure capital adequacy, beating the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Northeast Bank's Tier 1 capital ratio was 18.77 percent, above the 6 percent level considered adequate by regulators, but less than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather economic challenges.

Overall, Northeast Bank held equity amounting to 14.07 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

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

Having lots of these types of assets could eventually force a bank to use capital to cover losses, cutting down on its cushion of equity. It also means that there are likely to be many assets that are in non-accrual status and no longer earning interest for the bank, pushing down earnings and increasing the risk of a future failure.

On Bankrate's test of asset quality, Northeast Bank scored 36 out of a possible 40 points, below the national average of 37.49 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, 2.32 percent of Northeast Bank's loans were noncurrent, meaning they were more than 90 days past due or were in non-accrual status. That's above the national average of 1.01 percent.

Banks maintain a reserve to handle troubled assets known as an "allowance for loan and lease losses." 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 Northeast Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its safety and soundness. A bank can retain its earnings, giving a boost to its capital cushion, or use them to address problematic loans, likely making the bank better able to withstand economic shocks. Conversely, losses take away from a bank's ability to do those things.

Northeast Bank beat 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 (essentially, profit) by the total amount of equity, is one important way to measure a bank's earnings. Northeast Bank's most recent annualized quarterly return on equity was 11.60 percent, above the national average of 8.10 percent.

The bank recorded net income of $16.0 million on total equity of $145.8 million for the twelve months ended December 31, 2017. The bank reported 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.