Safe and Sound

Northern State Bank of Virginia

Virginia, MN
4
Star Rating
Founded in 1966, Northern State Bank of Virginia is an FDIC-insured bank based in Virginia, MN. The bank has equity of $5.2 million on $64.4 million in assets, according to December 31, 2017, regulatory filings.

U.S. bank customers have $59.0 million on deposit at 2 offices in MN run by 17 full-time employees. With that footprint, the bank currently holds loans and leases worth $46.7 million, including real estate loans of $40.0 million.

Overall, Bankrate believes that, as of December 31, 2017, Northern State Bank of Virginia 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 major criteria Bankrate used to evaluate American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a cushion against losses and provides protection for depositors during times of financial trouble for the bank. It follows then that when it comes to measuring an an institution's financial stability, capital is important. From a safety and soundness perspective, the more capital, the better.

On our test to measure the adequacy of a bank's capital, Northern State Bank of Virginia received a score of 8 out of a possible 30 points, falling short of the national average of 13.13.

A bank's Tier 1 capital ratio is an important measure of this buffer. Northern State Bank of Virginia's Tier 1 capital ratio was 12.87 percent, higher than the 6 percent level considered adequate by regulators, but under the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to economic challenges.

Overall, Northern State Bank of Virginia held equity amounting to 8.08 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 capitalization and allocated loan loss reserves could be affected by troubled assets, such as past-due loans.

Having a large number of these kinds of assets may eventually force a bank to use capital to absorb losses, shrinking its equity buffer. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, reducing earnings and increasing the chances of a future failure.

Northern State Bank of Virginia exceeded the national average of 37.49 on Bankrate's test of asset quality, racking up 40 out of a possible 40 points .

A handy indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, none of Northern State Bank of Virginia'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 keep a reserve to handle problem assets known as an "allowance for loan and lease losses." That reserve's size can be a widely used indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on Northern State Bank of Virginia's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money has an effect on its safety and soundness. A bank can retain its earnings, increasing its capital buffer, or use them to address problematic loans, potentially making the bank more resilient in tough times. However, banks that are losing money are less able to do those things.

On Bankrate's earnings test, Northern State Bank of Virginia scored 18 out of a possible 30, beating the national average of 15.12.

Return on equity, calculated by dividing net income (essentially, profit) by total equity, is one widely used measure of a bank's earnings. Northern State Bank of Virginia's most recent annualized quarterly return on equity was 10.36 percent, above the national average of 8.10 percent.

The bank reported net income of $512,000 on total equity of $5.2 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 0.80 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below 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.