Safe and Sound

Commonwealth Co-operative Bank

Hyde Park, MA
4
Star Rating
Commonwealth Co-operative Bank is a Hyde Park, MA-based, FDIC-insured bank founded in 1886. The bank has equity of $25.7 million on $178.7 million in assets, according to December 31, 2017, regulatory filings.

With 25 full-time employees in 3 offices in MA, the bank currently holds loans and leases worth $134.9 million, including real estate loans of $134.2 million. U.S. bank customers currently have $122.6 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Commonwealth Co-operative Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a look at how the bank fared on the three major criteria Bankrate used to grade U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial strength, capital is important. It works as a bulwark against losses and as protection for accountholders when a bank is experiencing economic instability. From a safety and soundness perspective, more capital is preferred.

Commonwealth Co-operative Bank exceeded the national average of 13.13 points on our test to measure capital adequacy, racking up 20 out of a possible 30 points.

A bank's Tier 1 capital ratio is a commonly used measure of this buffer. Commonwealth Co-operative Bank's Tier 1 capital ratio was 26.02 percent, above the 6 percent level regulators consider adequate, and higher than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to economic difficulties.

Overall, Commonwealth Co-operative Bank held equity amounting to 14.39 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

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

A bank with extensive holdings of these types of assets could eventually have to use capital to absorb losses, reducing its equity buffer. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, reducing earnings and increasing the chances of a future failure.

Commonwealth Co-operative Bank exceeded the national average of 37.49 on Bankrate's test of asset quality, racking up 40 out of a possible 40 points .

A helpful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.87 percent of Commonwealth Co-operative 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 maintain a reserve known as an "allowance for loan and lease losses" to deal with problem assets . Comparing the size of that reserve to the total amount of problematic loans can be a helpful indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Commonwealth Co-operative Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money affects its safety and soundness. Earnings may be retained by the bank, giving a boost to its capital buffer, or be used to address problematic loans, likely making the bank more resilient in times of trouble. Losses, on the other hand, take away from a bank's ability to do those things.

Commonwealth Co-operative Bank fell behind the national average on Bankrate's test of earnings, achieving a score of 6 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, basically) by total equity. The most recent annualized quarterly return on equity for Commonwealth Co-operative Bank was 2.49 percent, below the national average of 8.10 percent.

The bank earned net income of $639,000 on total equity of $25.7 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.35 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.