Safe and Sound

Northstar Bank

Bad Axe, MI
4
Star Rating
Northstar Bank is an FDIC-insured bank founded in 2001 and currently based in Bad Axe, MI. Regulatory filings show the bank having equity of $59.6 million on assets of $637.6 million, as of December 31, 2017.

With 140 full-time employees in 12 offices in MI, the bank has amassed loans and leases worth $498.9 million, including real estate loans of $410.8 million. U.S. bank customers currently have $564.3 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Northstar Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a breakdown of how the bank did on the three key criteria Bankrate used to grade American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a cushion against losses and provides protection for account holders when a bank is experiencing financial trouble. It follows then that a bank's level of capital is a valuable measurement of an institution's financial resilience. From a safety and soundness perspective, more capital is preferred.

Northstar Bank received a score of 8 out of a possible 30 points on our test to measure the adequacy of a bank's capital, lower than the national average of 13.13.

A bank's Tier 1 capital ratio is a widely used measure of this buffer. Northstar Bank's Tier 1 capital ratio was 10.21 percent, higher than the 6 percent level considered adequate by regulators, but under the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather economic downturns.

Overall, Northstar Bank held equity amounting to 9.35 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to try to understand 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 mortgages.

A bank with lots of these kinds of assets may eventually be required to use capital to absorb losses, diminishing 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 money, pushing down earnings and elevating the chances of a future failure.

On Bankrate's asset quality test, Northstar Bank scored 32 out of a possible 40 points, less than 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, 2.80 percent of Northstar 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 keep a reserve to handle troubled assets known as an "allowance for loan and lease losses." Comparing how large that reserve is to the total amount of problem loans can be a widely used indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Northstar Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its safety and soundness. Earnings can be retained by the bank, boosting its capital cushion, or be used to address problematic loans, likely making the bank better able to withstand financial shocks. Banks that are losing money, however, are less able to do those things.

Northstar Bank scored 24 out of a possible 30 on Bankrate's test of earnings, beating the national average of 15.12.

One widely used measure of a bank's earnings is return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity. Northstar Bank's most recent annualized quarterly return on equity was 15.03 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $8.7 million on total equity of $59.6 million. The bank experienced an annualized return on average assets, or ROA, of 1.41 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.