Safe and Sound

Northfield Savings Bank

Northfield, VT
4
Star Rating
Founded in 1867, Northfield Savings Bank is an FDIC-insured bank based in Northfield, VT. The bank has equity of $111.3 million on assets of $959.4 million, according to December 31, 2017, regulatory filings.

With 157 full-time employees in 13 offices in VT, the bank currently holds loans and leases worth $744.6 million, including real estate loans of $671.0 million. U.S. bank customers currently have $723.0 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Northfield Savings Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a look at how the bank fared on the three key criteria Bankrate used to score U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital is a valuable measurement of an institution's financial resilience. It works as a buffer against losses and affords protection for depositors when a bank is struggling financially. When looking at safety and soundness, the more capital, the better.

Northfield Savings Bank beat out the national average of 13.13 points on our test to measure the adequacy of a bank's capital, scoring 14 out of a possible 30 points.

One important measure of this buffer is a bank's Tier 1 capital ratio. Northfield Savings Bank's Tier 1 capital ratio was 16.15 percent, higher than the 6 percent level regulators consider adequate, but lower than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather economic downturns.

Overall, Northfield Savings Bank held equity amounting to 11.61 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to estimate the effect of troubled assets, such as past-due mortgages, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

A bank with extensive holdings of these kinds of assets may eventually have to use capital to cover losses, shrinking its buffer of equity. 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, decreasing earnings and elevating the risk of a failure in the future.

Northfield Savings Bank beat out the national average of 37.49 on Bankrate's asset quality test, racking up 40 out of a possible 40 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, 0.74 percent of Northfield Savings 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 keep a reserve to deal with troubled assets known as an "allowance for loan and lease losses." The size of that reserve can be a widely used indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on Northfield Savings Bank'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, expanding its capital cushion, or put them to work addressing problematic loans, likely making the bank more resilient in times of trouble. Losses, on the other hand, diminish a bank's ability to do those things.

Northfield Savings Bank fell behind the national average on Bankrate's test of earnings, achieving a score of 6 out of a possible 30.

One important way to measure a bank's earnings is return on equity, or net income (profit, essentially) divided by total equity. The most recent annualized quarterly return on equity for Northfield Savings Bank was 2.96 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $3.3 million on total equity of $111.3 million. The bank had an annualized return on average assets, or ROA, of 0.35 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.