Safe and Sound

Mechanics Cooperative Bank

Taunton, MA
4
Star Rating
Mechanics Cooperative Bank is a Taunton, MA-based, FDIC-insured bank dating back to 1877. The bank has equity of $49.6 million on $572.0 million in assets, according to December 31, 2017, regulatory filings.

Thanks to the efforts of 91 full-time employees in 9 offices in MA, the bank holds loans and leases worth $468.3 million, including real estate loans of $437.0 million. The bank currently holds $418.9 million in deposits from U.S. customers.

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

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a cushion against losses and affords protection for depositors during times of economic trouble for the bank. Therefore, a bank's level of capital is a key measurement of a bank's financial resilience. From a safety and soundness perspective, more capital is preferred.

Mechanics Cooperative Bank received a score of 8 out of a possible 30 points on our test to measure capital adequacy, less than the national average of 13.13.

One important measure of this buffer is a bank's Tier 1 capital ratio. Mechanics Cooperative Bank's Tier 1 capital ratio was 12.11 percent, higher than the 6 percent level considered adequate by regulators, but below the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather financial headwinds.

Overall, Mechanics Cooperative Bank held equity amounting to 8.68 percent of its assets, which was lower than 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 past-due loans.

A bank with large numbers of these types of assets may eventually be required to use capital to absorb losses, decreasing 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, diminishing earnings and elevating the chances of a failure in the future.

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

A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.33 percent of Mechanics Cooperative 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 reserve's size to the total amount of at-risk loans can be a helpful indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Mechanics Cooperative Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance affects its long-term survivability. A bank can retain its earnings, increasing its capital cushion, or put them to work addressing problematic loans, potentially making the bank more resilient in tough times. Conversely, losses diminish a bank's ability to do those things.

Mechanics Cooperative Bank scored 18 out of a possible 30 on Bankrate's test of earnings, beating the national average of 15.12.

Return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity, is one important way to measure a bank's earnings. Mechanics Cooperative Bank's most recent annualized quarterly return on equity was 9.12 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $4.3 million on total equity of $49.6 million. The bank had an annualized return on average assets, or ROA, of 0.79 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.