Safe and Sound

Aroostook County Federal Savings and Loan Association

Caribou, ME
4
Star Rating
Aroostook County Federal Savings and Loan Association is a Caribou, ME-based, FDIC-insured bank founded in 1936. The bank has equity of $13.1 million on assets of $118.7 million, according to December 31, 2017, regulatory filings.

With 24 full-time employees in 2 offices in ME, the bank currently holds loans and leases worth $91.4 million, including real estate loans of $75.3 million. U.S. bank customers currently have $101.5 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Aroostook County Federal Savings and Loan Association exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a breakdown of how the bank did on the three major criteria Bankrate used to score American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a buffer against losses and provides protection for account holders when a bank is experiencing economic trouble. It follows then that a bank's level of capital is an important measurement of an institution's financial strength. When looking at safety and soundness, the more capital, the better.

On our test to measure capital adequacy, Aroostook County Federal Savings and Loan Association achieved a score of 14 out of a possible 30 points, better than the national average of 13.13.

One widely used measure of this buffer is a bank's Tier 1 capital ratio. Aroostook County Federal Savings and Loan Association's Tier 1 capital ratio was 18.11 percent, higher than the 6 percent level considered adequate by regulators, but lower than the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather economic headwinds.

Overall, Aroostook County Federal Savings and Loan Association held equity amounting to 11.03 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 past-due mortgages, on the bank's loan loss reserves and overall capitalization.

A bank with lots of these kinds of assets could eventually have to use capital to cover losses, diminishing its buffer of equity. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning money, decreasing earnings and elevating the chances of a future failure.

On Bankrate's asset quality test, Aroostook County Federal Savings and Loan Association scored 40 out of a possible 40 points, better than 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, 0.81 percent of Aroostook County Federal Savings and Loan Association'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 problem assets known as an "allowance for loan and lease losses." How large that reserve is 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 Aroostook County Federal Savings and Loan Association's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its long-term survivability. A bank can retain its earnings, boosting its capital buffer, or use them to address problematic loans, potentially making the bank more resilient in tough times. Conversely, losses reduce a bank's ability to do those things.

Aroostook County Federal Savings and Loan Association received below-average marks on Bankrate's earnings test, achieving a score of 10 out of a possible 30.

Return on equity, calculated by dividing net income (profit, essentially) by total equity, is one widely used measure of a bank's earnings. The most recent annualized quarterly return on equity for Aroostook County Federal Savings and Loan Association was 4.78 percent, below the national average of 8.10 percent.

The bank reported net income of $614,000 on total equity of $13.1 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 0.53 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.