Safe and Sound

Charles River Bank

Medway, MA
3
Star Rating
Charles River Bank is a Medway, MA-based, FDIC-insured bank founded in 1915. The bank has equity of $19.0 million on $234.6 million in assets, according to December 31, 2017, regulatory filings.

U.S. bank customers have $200.9 million on deposit at 4 offices in MA run by 43 full-time employees. With that footprint, the bank holds loans and leases worth $172.3 million, $161.3 million of which are for real estate.

Overall, Bankrate believes that, as of December 31, 2017, Charles River Bank exhibited a generally satisfactory condition, earning 3 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 evaluate U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital is an essential measurement of a bank's financial fortitude. It acts as a bulwark against losses and provides protection for depositors during periods of financial instability for the bank. When it comes to safety and soundness, the higher the capital, the better.

Charles River Bank fell below the national average of 13.13 on our test to measure the adequacy of a bank's capital, racking up 6 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Charles River Bank's Tier 1 capital ratio was 12.54 percent, exceeding the 6 percent level regulators consider adequate, but lower than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather financial headwinds.

Overall, Charles River Bank held equity amounting to 8.10 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to estimate how the bank's loan loss reserves and overall capitalization could be affected by troubled assets, such as unpaid loans.

A bank with large numbers of these types of assets may eventually be required to use capital to cover losses, reducing its buffer of equity. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, diminishing earnings and increasing the chances of a failure in the future.

On Bankrate's asset quality test, Charles River Bank 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 useful indicator of asset quality.As of December 31, 2017, 0.24 percent of Charles River 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 maintain a reserve known as an "allowance for loan and lease losses" to deal with problem assets . Comparing the reserve's size to the total amount of at-risk 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 Charles River Bank'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, boosting its capital cushion, or be used to address problematic loans, potentially making the bank more resilient in tough times. Losses, on the other hand, diminish a bank's ability to do those things.

On Bankrate's earnings test, Charles River Bank scored 6 out of a possible 30, below the national average of 15.12.

One important way to measure a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by total equity. The most recent annualized quarterly return on equity for Charles River Bank was 2.05 percent, below the national average of 8.10 percent.

The bank earned net income of $389,000 on total equity of $19.0 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.17 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.