WHAT IS
SAFE AND SOUND?
When it comes to measuring a credit union's financial stability, capital is useful. It acts as a buffer against losses and provides protection for members when a credit union is experiencing economic trouble. From a safety and soundness perspective, more capital is preferred.
NOVATION received a score of 6 out of a possible 30 points on our test to measure capital adequacy, below the national average of 15.65.
NOVATION's capitalization ratio of 6.00 percent in our test was lower than the average for all credit unions, suggesting that it could have a harder time weathering financial trouble than its peers.
This test's purpose is to try to understand how the credit union's reserves set aside to cover loan losses, as well as overall capitalization could be affected by problem assets, such as past-due mortgages.
A credit union with a large number of these types of assets may eventually have to use capital to cover losses, shrinking 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 interest for the credit union, diminishing earnings and increasing the risk of a future failure.
On Bankrate's test of asset quality, NOVATION scored 40 out of a possible 40 points, beating the national average of 38.09 points.
A lower-than-average ratio of troubled assets of 0.00 percent in our test was potentially indicative of superior financial strength compared to other credit unions.
A credit union's profitability affects its long-term survivability. A credit union can retain its earnings, increasing its capital buffer, or use them to deal with problematic loans, likely making the credit union more resilient in times of trouble. Credit unions that are losing money, however, are less able to do those things.
NOVATION scored 16 out of a possible 30 on Bankrate's earnings test, better than the national average of 10.11.
One indication that the credit union is outperforming its peers in this area was its earnings ratio of 0.00 percent in our test, above the average for all credit unions.
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.
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.