Safe and Sound

Mechanics' Savings Bank

Auburn, ME
4
Star Rating
Mechanics' Savings Bank is an Auburn, ME-based, FDIC-insured bank that opened its doors in 1875. Regulatory filings show the bank having equity of $47.8 million on assets of $396.5 million, as of December 31, 2017.

With 36 full-time employees in 4 offices in ME, the bank holds loans and leases worth $336.9 million, including real estate loans of $303.7 million. U.S. bank customers currently have $280.2 million in deposits with the bank.

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

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THE INSTITUTION'S SCORE

Capital Score

Capital is a useful measurement of an institution's financial fortitude. It works as a buffer against losses and affords protection for accountholders during periods of financial instability for the bank. From a safety and soundness perspective, more capital is preferred.

On our test to measure capital adequacy, Mechanics' Savings Bank achieved a score of 16 out of a possible 30 points, exceeding the national average of 13.13.

A bank's Tier 1 capital ratio is a commonly used measure of this buffer. Mechanics' Savings Bank's Tier 1 capital ratio was 16.06 percent, exceeding the 6 percent level regulators consider adequate, but less than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to financial difficulties.

Overall, Mechanics' Savings Bank held equity amounting to 12.05 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to try to understand 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 be forced to use capital to cover losses, cutting down on its cushion of equity. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning money, diminishing earnings and elevating the risk of a future failure.

On Bankrate's test of asset quality, Mechanics' Savings Bank scored 36 out of a possible 40 points, falling short of the national average of 37.49 points.

The percentage of problem assets a bank holds compared to its total assets is a useful indicator of asset quality.As of December 31, 2017, 1.14 percent of Mechanics' Savings Bank's loans were noncurrent, meaning they were more than 90 days past due or were in non-accrual status. That's above the national average of 1.01 percent.

Banks keep a reserve to deal with troubled assets known as an "allowance for loan and lease losses." That reserve's size can be a handy indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on Mechanics' Savings Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money affects its long-term survivability. Earnings can be retained by the bank, boosting its capital cushion, or be used to address problematic loans, likely making the bank better able to withstand financial shocks. Obviously, banks that are losing money have less ability to do those things.

Mechanics' Savings Bank scored 12 out of a possible 30 on Bankrate's test of earnings, lower than the national average of 15.12.

One key measure of a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by the total amount of equity. Mechanics' Savings Bank's most recent annualized quarterly return on equity was 5.34 percent, below the national average of 8.10 percent.

The bank earned net income of $2.5 million on total equity of $47.8 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.64 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.