Safe and Sound

Northern Bank & Trust Company

Woburn, MA
4
Star Rating
Northern Bank & Trust Company is a Woburn, MA-based, FDIC-insured bank dating back to 1960. As of December 31, 2017, the bank had equity of $202.5 million on assets of $2.07 billion.

U.S. bank customers have $1.67 billion on deposit at 13 offices in MA run by 175 full-time employees. With that footprint, the bank currently holds loans and leases worth $1.81 billion, $1.18 billion of which are for real estate.

Overall, Bankrate believes that, as of December 31, 2017, Northern Bank & Trust Company exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's an analysis of how the bank fared on the three important criteria Bankrate used to score U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital is a crucial measurement of a bank's financial resilience. It works as a buffer against losses and provides protection for accountholders when a bank is struggling financially. When it comes to safety and soundness, the higher the capital, the better.

Northern Bank & Trust Company finished below the national average of 13.13 on our test to measure capital adequacy, achieving a score of 10 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Northern Bank & Trust Company's Tier 1 capital ratio was 10.54 percent, exceeding the 6 percent level regulators consider adequate, but below the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather financial headwinds.

Overall, Northern Bank & Trust Company held equity amounting to 9.79 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test is intended to estimate how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by problem assets, such as past-due loans.

Having a large number of these types of assets means a bank could have to use capital to absorb losses, diminishing its equity buffer. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, resulting in lower earnings and potentially more risk of a failure in the future.

On Bankrate's test of asset quality, Northern Bank & Trust Company scored 36 out of a possible 40 points, lower than the national average of 37.49 points.

A helpful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 1.35 percent of Northern Bank & Trust Company'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 keep a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . Comparing the reserve's size to the total amount of problematic loans can be a helpful indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Northern Bank & Trust Company's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its safety and soundness. A bank can retain its earnings, boosting its capital buffer, or use them to address problematic loans, likely making the bank more resilient in times of trouble. Conversely, losses take away from a bank's ability to do those things.

On Bankrate's test of earnings, Northern Bank & Trust Company scored 20 out of a possible 30, exceeding the national average of 15.12.

One key measure of a bank's earnings is return on equity, or net income (profit, essentially) divided by the total amount of equity. Northern Bank & Trust Company's most recent annualized quarterly return on equity was 12.64 percent, above the national average of 8.10 percent.

The bank reported net income of $24.3 million on total equity of $202.5 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 1.26 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.