Safe and Sound

Mechanics Bank

Mansfield, OH
4
Star Rating
Mansfield, OH-based Mechanics Bank is an FDIC-insured bank founded in 1886. The bank has equity of $42.5 million on $509.2 million in assets, according to December 31, 2017, regulatory filings.

Thanks to the work of 130 full-time employees in 9 offices in OH, the bank has amassed loans and leases worth $409.7 million, including real estate loans of $387.8 million. U.S. bank customers currently have $453.4 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Mechanics Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a breakdown of how the bank fared on the three important criteria Bankrate used to evaluate U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a cushion against losses and as protection for depositors when a bank is experiencing economic trouble. Therefore, when it comes to measuring an an institution's financial strength, capital is useful. When it comes to safety and soundness, the higher the capital, the better.

Mechanics Bank scored below the national average of 13.13 on our test to measure capital adequacy, receiving a score of 8 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Mechanics Bank's Tier 1 capital ratio was 15.65 percent, higher than the 6 percent level considered adequate by regulators, but lower than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather economic difficulties.

Overall, Mechanics Bank held equity amounting to 8.35 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 effect of problem 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 extensive holdings of these types of assets may eventually be required to use capital to cover losses, shrinking its cushion of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning interest for the bank, decreasing earnings and increasing the chances of a failure in the future.

Mechanics Bank scored below the national average of 37.49 on Bankrate's asset quality test, racking up 36 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, 0.83 percent of Mechanics 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 to deal with problem assets known as an "allowance for loan and lease losses." Comparing the size of that reserve to the total amount of problem loans can be a useful indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Mechanics Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability has an effect on its long-term survivability. Earnings can be retained by the bank, boosting its capital buffer, or be used to address problematic loans, likely making the bank better prepared to withstand economic shocks. Losses, on the other hand, lessen a bank's ability to do those things.

On Bankrate's test of earnings, Mechanics Bank scored 16 out of a possible 30, beating the national average of 15.12.

One widely used measure of a bank's earnings is return on equity, calculated by dividing net income (profit, basically) by the total amount of equity. Mechanics Bank's most recent annualized quarterly return on equity was 7.10 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $3.0 million on total equity of $42.5 million. The bank reported an annualized return on average assets, or ROA, of 0.59 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.