Safe and Sound

The Northumberland National Bank

Northumberland, PA
4
Star Rating
The Northumberland National Bank is an FDIC-insured bank founded in 1903 and currently headquartered in Northumberland, PA. Regulatory filings show the bank having equity of $48.6 million on $507.7 million in assets, as of December 31, 2017.

U.S. bank customers have $453.4 million on deposit at 7 offices in PA run by 100 full-time employees. With that footprint, the bank holds loans and leases worth $320.0 million, including real estate loans of $253.8 million.

Overall, Bankrate believes that, as of December 31, 2017, The Northumberland National Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a look at how the bank did on the three key criteria Bankrate used to score American banks.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial resilience, capital is essential. It works as a buffer against losses and provides protection for depositors when a bank is experiencing economic instability. When looking at safety and soundness, more capital is better.

On our test to measure capital adequacy, The Northumberland National Bank received a score of 10 out of a possible 30 points, below the national average of 13.13.

A bank's Tier 1 capital ratio is a commonly used measure of this buffer. The Northumberland National Bank's Tier 1 capital ratio was 18.31 percent, higher than the 6 percent level considered adequate by regulators, but under the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to financial challenges.

Overall, The Northumberland National Bank held equity amounting to 9.59 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test is intended to try to understand how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by troubled assets, such as unpaid mortgages.

Having lots of these types of assets may eventually require a bank to use capital to cover losses, cutting down on its equity buffer. 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.

The Northumberland National Bank did better than the national average of 37.49 on Bankrate's test of asset quality, racking up 40 out of a possible 40 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, 0.69 percent of The Northumberland National Bank's loans were noncurrent -- in other words, 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 keep a reserve to deal with troubled assets known as an "allowance for loan and lease losses." The size of that reserve can be a helpful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on The Northumberland National Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its safety and soundness. A bank can retain its earnings, increasing its capital buffer, or use them to address problematic loans, likely making the bank more resilient in tough times. Losses, on the other hand, diminish a bank's ability to do those things.

The Northumberland National Bank fell behind the national average on Bankrate's earnings test, achieving a score of 10 out of a possible 30.

One widely used way to measure a bank's earnings is return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity. The most recent annualized quarterly return on equity for The Northumberland National Bank was 4.16 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $2.0 million on total equity of $48.6 million. The bank experienced an annualized return on average assets, or ROA, of 0.40 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.