Safe and Sound

The First National Bank of Northfield

Northfield, MN
5
Star Rating
Northfield, MN-based The First National Bank of Northfield is an FDIC-insured bank started in 1872. Regulatory filings show the bank having equity of $17.5 million on $191.9 million in assets, as of December 31, 2017.

With 39 full-time employees in 2 offices in MN, the bank has amassed loans and leases worth $147.7 million, including real estate loans of $113.7 million. U.S. bank customers currently have $168.3 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, The First National Bank of Northfield exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for an analysis of how the bank fared on the three key criteria Bankrate used to grade U.S. 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 provides protection for account holders when a bank is experiencing economic instability. Therefore, when it comes to measuring an an institution's financial resilience, capital is crucial. When it comes to safety and soundness, the more capital, the better.

The First National Bank of Northfield received a score of 10 out of a possible 30 points on our test to measure capital adequacy, falling short of the national average of 13.13.

A bank's Tier 1 capital ratio is an important measure of this buffer. The First National Bank of Northfield's Tier 1 capital ratio was 11.97 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 stand up to financial headwinds.

Overall, The First National Bank of Northfield held equity amounting to 9.11 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to determine the impact of problem assets, such as unpaid mortgages, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

A bank with a large number of these types of assets may eventually be forced to use capital to cover losses, cutting down on its equity cushion. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning money, diminishing earnings and elevating the risk of a future failure.

On Bankrate's test of asset quality, The First National Bank of Northfield scored 40 out of a possible 40 points, better than the national average of 37.49 points.

A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.01 percent of The First National Bank of Northfield'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 to deal with troubled assets known as an "allowance for loan and lease losses." The size of that reserve can be a handy indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of at-risk loans. The First National Bank of Northfield's loan loss allowance was 13,085.71 percent of its total noncurrent loans, above the national average. All else being equal, a higher ratio of loan loss allowance to noncurrent loans is better.

Earnings score

How profitable a bank is affects its long-term survivability. Earnings may be retained by the bank, giving a boost to its capital cushion, or be used to deal with problematic loans, potentially making the bank better able to withstand economic trouble. Conversely, losses take away from a bank's ability to do those things.

On Bankrate's earnings test, The First National Bank of Northfield scored 22 out of a possible 30, better than the national average of 15.12.

One important measure of a bank's earnings is return on equity, calculated by dividing net income (profit, essentially) by total equity. The First National Bank of Northfield's most recent annualized quarterly return on equity was 12.34 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $2.1 million on total equity of $17.5 million. The bank experienced an annualized return on average assets, or ROA, of 1.16 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.