Safe and Sound

Northwest Bank

Boise, ID
5
Star Rating
Boise, ID-based Northwest Bank is an FDIC-insured bank started in 2008. The bank has equity of $74.7 million on assets of $605.9 million, according to December 31, 2017, regulatory filings.

With 103 full-time employees in 5 offices in multiple states, the bank has amassed loans and leases worth $506.3 million, including real estate loans of $266.8 million. U.S. bank customers currently have $508.4 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Northwest Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's an analysis of how the bank did on the three major criteria Bankrate used to evaluate American banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

Capital works as a cushion against losses and affords protection for depositors when a bank is experiencing economic trouble. It follows then that a bank's level of capital is a valuable measurement of a bank's financial fortitude. When it comes to safety and soundness, more capital is better.

Northwest Bank racked up 16 out of a possible 30 points on our test to measure the adequacy of a bank's capital, beating the national average of 13.13.

A bank's Tier 1 capital ratio is a commonly used measure of this buffer. Northwest Bank's Tier 1 capital ratio was 12.03 percent, higher than the 6 percent level regulators consider adequate, but lower than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather economic downturns.

Overall, Northwest Bank held equity amounting to 12.33 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to determine the impact of troubled assets, such as unpaid loans, on the bank's capitalization and allocated loan loss reserves.

Having large numbers of these types of assets suggests a bank may have to use capital to absorb losses, decreasing its buffer of equity. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, decreasing earnings and increasing the risk of a future failure.

Northwest Bank scored 40 out of a possible 40 points on Bankrate's asset quality test, beating the national average of 37.49.

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, 0.58 percent of Northwest 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 maintain a reserve known as an "allowance for loan and lease losses" to deal with problem assets . Comparing the reserve's size to the total amount of problematic loans can be a handy indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Northwest Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its safety and soundness. A bank can retain its earnings, expanding its capital buffer, or use them to address problematic loans, potentially making the bank better able to withstand financial shocks. Obviously, banks that are losing money are less able to do those things.

On Bankrate's test of earnings, Northwest Bank scored 14 out of a possible 30, lower than the national average of 15.12.

Return on equity, calculated by dividing net income (profit, basically) by total equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for Northwest Bank was 6.93 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $5.0 million on total equity of $74.7 million. The bank reported an annualized return on average assets, or ROA, of 0.88 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.