Safe and Sound

The Northern State Bank of Gonvick

Gonvick, MN
5
Star Rating
The Northern State Bank of Gonvick is an FDIC-insured bank founded in 1928 and currently based in Gonvick, MN. Regulatory filings show the bank having equity of $6.6 million on assets of $42.0 million, as of December 31, 2017.

With 5 full-time employees, the bank holds loans and leases worth $6.7 million, including real estate loans of $3.1 million. U.S. bank customers currently have $35.3 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, The Northern State Bank of Gonvick 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 score U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

Capital acts as a bulwark against losses and affords protection for depositors during times of financial trouble for the bank. It follows then that when it comes to measuring an an institution's financial fortitude, capital is useful. When it comes to safety and soundness, the higher the capital, the better.

On our test to measure the adequacy of a bank's capital, The Northern State Bank of Gonvick scored 22 out of a possible 30 points, exceeding the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. The Northern State Bank of Gonvick's Tier 1 capital ratio was 76.67 percent, higher than the 6 percent level regulators consider adequate, and above 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 Northern State Bank of Gonvick held equity amounting to 15.79 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test is intended to try to understand how the bank's loan loss reserves and overall capitalization could be affected by troubled assets, such as past-due loans.

Having a large number of these types of assets suggests a bank may eventually have to use capital to absorb losses, decreasing 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 interest for the bank, reducing earnings and increasing the risk of a future failure.

On Bankrate's asset quality test, The Northern State Bank of Gonvick scored 40 out of a possible 40 points, above 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, 1.19 percent of The Northern State Bank of Gonvick'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 maintain a reserve to handle problem 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 problematic loans. Unfortunately, the FDIC did not provide information on The Northern State Bank of Gonvick's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its long-term survivability. Earnings may be retained by the bank, increasing its capital cushion, or be used to deal with problematic loans, potentially making the bank more resilient in tough times. Conversely, losses reduce a bank's ability to do those things.

On Bankrate's test of earnings, The Northern State Bank of Gonvick scored 10 out of a possible 30, lower than the national average of 15.12.

One widely used measure of a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by total equity. The Northern State Bank of Gonvick's most recent annualized quarterly return on equity was 4.87 percent, below the national average of 8.10 percent.

The bank earned net income of $315,000 on total equity of $6.6 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 0.75 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.