Safe and Sound

Kennebec Savings Bank

Augusta, ME
5
Star Rating
Kennebec Savings Bank is an FDIC-insured bank founded in 1870 and currently based in Augusta, ME. The bank has equity of $128.6 million on $952.5 million in assets, according to December 31, 2017, regulatory filings.

U.S. bank customers have $640.5 million on deposit at 5 offices in ME run by 129 full-time employees. With that footprint, the bank currently holds loans and leases worth $775.0 million, including $736.0 million worth of real estate loans.

Overall, Bankrate believes that, as of December 31, 2017, Kennebec Savings Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's an analysis of how the bank did on the three major criteria Bankrate used to grade U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a bulwark against losses and as protection for account holders when a bank is struggling financially. Therefore, when it comes to measuring an a bank's financial fortitude, capital is essential. When looking at safety and soundness, the higher the capital, the better.

On our test to measure capital adequacy, Kennebec Savings Bank racked up 18 out of a possible 30 points, beating out the national average of 13.13.

One widely used measure of this buffer is a bank's Tier 1 capital ratio. Kennebec Savings Bank's Tier 1 capital ratio was 16.83 percent, higher than the 6 percent level regulators consider adequate, but under the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to financial headwinds.

Overall, Kennebec Savings Bank held equity amounting to 13.50 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 reserves set aside to cover loan losses, as well as overall capitalization, could be affected by problem assets, such as unpaid loans.

Having large numbers of these types of assets could eventually force a bank to use capital to cover losses, diminishing its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and no longer earning interest for the bank, reducing earnings and increasing the risk of a future failure.

Kennebec Savings Bank scored above the national average of 37.49 on Bankrate's asset quality test, racking up 40 out of a possible 40 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, 0.40 percent of Kennebec Savings 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 troubled 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 Kennebec Savings Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability affects its safety and soundness. Earnings can be retained by the bank, boosting its capital cushion, or be used to deal with problematic loans, likely making the bank better able to withstand financial shocks. Losses, on the other hand, lessen a bank's ability to do those things.

Kennebec Savings Bank scored 14 out of a possible 30 on Bankrate's earnings test, less than the national average of 15.12.

Return on equity, calculated by dividing net income (essentially, profit) by total equity, is one important way to measure a bank's earnings. Kennebec Savings Bank's most recent annualized quarterly return on equity was 6.77 percent, below the national average of 8.10 percent.

The bank reported net income of $8.3 million on total equity of $128.6 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.91 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.