Safe and Sound

Florence Bank

Florence, MA
4
Star Rating
Florence Bank is a Florence, MA-based, FDIC-insured bank that opened its doors in 1873. As of December 31, 2017, the bank had equity of $134.8 million on assets of $1.33 billion.

U.S. bank customers have $1.12 billion on deposit at 11 offices in MA run by 199 full-time employees. With that footprint, the bank currently holds loans and leases worth $1.02 billion, including real estate loans of $990.9 million.

Overall, Bankrate believes that, as of December 31, 2017, Florence Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a look at how the bank did on the three key criteria Bankrate used to score U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a bulwark against losses and affords protection for account holders when a bank is experiencing financial trouble. Therefore, a bank's level of capital is an important measurement of an institution's financial strength. From a safety and soundness perspective, the more capital, the better.

Florence Bank came in below the national average of 13.13 on our test to measure the adequacy of a bank's capital, racking up 12 out of a possible 30 points.

One widely followed measure of this buffer is a bank's Tier 1 capital ratio. Florence Bank's Tier 1 capital ratio was 15.20 percent, higher than the 6 percent level considered adequate by regulators, but less than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to economic challenges.

Overall, Florence Bank held equity amounting to 10.13 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 mortgages.

Having large numbers of these kinds of assets could eventually require a bank to use capital to absorb losses, cutting down on 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 interest for the bank, resulting in lower earnings and potentially more risk of a future failure.

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

A handy indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.25 percent of Florence 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 keep a reserve to handle problem assets known as an "allowance for loan and lease losses." Comparing the reserve's size to the total amount of at-risk loans can be a handy indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Florence Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money has an effect on its long-term survivability. A bank can retain its earnings, expanding its capital buffer, or use them to address problematic loans, likely making the bank better able to withstand financial trouble. However, banks that are losing money are less able to do those things.

Florence Bank scored 16 out of a possible 30 on Bankrate's earnings test, better than the national average of 15.12.

Return on equity, calculated by dividing net income (essentially, profit) by the total amount of equity, is one important way to measure a bank's earnings. Florence Bank's most recent annualized quarterly return on equity was 7.54 percent, below the national average of 8.10 percent.

The bank recorded net income of $9.9 million on total equity of $134.8 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 0.76 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.