Safe and Sound

Avidia Bank

Hudson, MA
4
Star Rating
Avidia Bank is a Hudson, MA-based, FDIC-insured bank started in 1869. As of December 31, 2017, the bank had equity of $152.5 million on $1.52 billion in assets.

Thanks to the efforts of 226 full-time employees in 11 offices in MA, the bank has amassed loans and leases worth $1.19 billion, including real estate loans of $783.9 million. The bank currently holds $1.11 billion in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, Avidia Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a breakdown of how the bank fared on the three key criteria Bankrate used to evaluate American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a bulwark against losses and affords protection for depositors when a bank is struggling financially. Therefore, when it comes to measuring an an institution's financial resilience, capital is important. From a safety and soundness perspective, the more capital, the better.

On our test to measure the adequacy of a bank's capital, Avidia Bank received a score of 10 out of a possible 30 points, below the national average of 13.13.

One essential measure of this buffer is a bank's Tier 1 capital ratio. Avidia Bank's Tier 1 capital ratio was 11.54 percent, higher than the 6 percent level considered adequate by regulators, but under the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to financial headwinds.

Overall, Avidia Bank held equity amounting to 10.04 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 troubled assets, such as past-due loans, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

A bank with large numbers of these kinds of assets may eventually be forced to use capital to absorb losses, reducing 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, diminishing earnings and increasing the risk of a failure in the future.

On Bankrate's asset quality test, Avidia Bank scored 40 out of a possible 40 points, beating out the national average of 37.49 points.

The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of December 31, 2017, 0.33 percent of Avidia Bank'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 keep a reserve known as an "allowance for loan and lease losses" to deal with problem assets . Comparing how large that reserve is to the total amount of problem loans can be a widely used indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Avidia Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance has an effect on its long-term survivability. A bank can retain its earnings, giving a boost to its capital cushion, or use them to address problematic loans, likely making the bank more resilient in times of trouble. Obviously, banks that are losing money have less ability to do those things.

Avidia Bank received above-average marks on Bankrate's test of earnings, achieving a score of 16 out of a possible 30.

One widely used measure of a bank's earnings is return on equity, or net income (profit, essentially) divided by the total amount of equity. Avidia Bank's most recent annualized quarterly return on equity was 8.08 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $10.9 million on total equity of $152.5 million. The bank had an annualized return on average assets, or ROA, of 0.74 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.