Safe and Sound

Northview Bank

Sandstone, MN
5
Star Rating
Sandstone, MN-based Northview Bank is an FDIC-insured bank founded in 1908. As of December 31, 2017, the bank had equity of $37.2 million on $322.0 million in assets.

Thanks to the work of 110 full-time employees in 13 offices in MN, the bank has amassed loans and leases worth $228.6 million, including $182.4 million worth of real estate loans. U.S. bank customers currently have $279.5 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Northview Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's an analysis of how the bank fared on the three major 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 works as a buffer against losses and provides protection for account holders when a bank is experiencing financial instability. Therefore, a bank's level of capital is an essential measurement of a bank's financial fortitude. From a safety and soundness perspective, the more capital, the better.

Northview Bank scored below the national average of 13.13 on our test to measure the adequacy of a bank's capital, receiving a score of 12 out of a possible 30 points.

One important measure of this buffer is a bank's Tier 1 capital ratio. Northview Bank's Tier 1 capital ratio was 13.39 percent, above the 6 percent level considered adequate by regulators, but under the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather economic headwinds.

Overall, Northview Bank held equity amounting to 11.55 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 loan loss reserves and overall capitalization could be affected by problem assets, such as unpaid mortgages.

A bank with lots of these kinds of assets could eventually be forced to use capital to absorb 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, diminishing earnings and elevating the risk of a future failure.

On Bankrate's test of asset quality, Northview 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 widely used indicator of asset quality.As of December 31, 2017, 1.44 percent of Northview Bank's loans were noncurrent -- in other words, 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 problem assets . Comparing the size of that reserve to the total amount of problem loans can be a widely used indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Northview Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance affects its safety and soundness. A bank can retain its earnings, giving a boost to its capital buffer, or put them to work addressing problematic loans, potentially making the bank better prepared to withstand economic trouble. Banks that are losing money, however, are less able to do those things.

Northview Bank received above-average marks on Bankrate's earnings test, achieving a score of 24 out of a possible 30.

Return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity, is one widely used measure of a bank's earnings. The most recent annualized quarterly return on equity for Northview Bank was 15.63 percent, above the national average of 8.10 percent.

The bank recorded net income of $5.6 million on total equity of $37.2 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 1.73 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.