Safe and Sound

Melrose Co-operative Bank

Melrose, MA
4
Star Rating
Started in 1890, Melrose Co-operative Bank is an FDIC-insured bank headquartered in Melrose, MA. Regulatory filings show the bank having equity of $36.0 million on assets of $302.9 million, as of December 31, 2017.

With 27 full-time employees, the bank currently holds loans and leases worth $251.4 million, including real estate loans of $252.4 million. U.S. bank customers currently have $235.0 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Melrose Co-operative Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's an analysis 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 is an essential measurement of a bank's financial strength. It acts as a buffer against losses and affords protection for accountholders when a bank is experiencing financial instability. From a safety and soundness perspective, the higher the capital, the better.

Melrose Co-operative Bank scored 14 out of a possible 30 points on our test to measure capital adequacy, better than the national average of 13.13.

A bank's Tier 1 capital ratio is a widely used measure of this buffer. Melrose Co-operative Bank's Tier 1 capital ratio was 19.05 percent, exceeding 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 downturns.

Overall, Melrose Co-operative Bank held equity amounting to 11.89 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 troubled assets, such as unpaid loans, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

Having lots of these types of assets may eventually require a bank to use capital to absorb losses, cutting down on its cushion of equity. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, diminishing earnings and elevating the risk of a future failure.

On Bankrate's test of asset quality, Melrose Co-operative Bank scored 40 out of a possible 40 points, beating the national average of 37.49 points.

A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.08 percent of Melrose Co-operative 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 to deal with troubled assets known as an "allowance for loan and lease losses." The size of that reserve can be a widely used indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on Melrose Co-operative Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money affects its safety and soundness. Earnings can be retained by the bank, boosting its capital cushion, or be used to deal with problematic loans, potentially making the bank better prepared to withstand economic shocks. Conversely, losses lessen a bank's ability to do those things.

Melrose Co-operative Bank scored 12 out of a possible 30 on Bankrate's earnings test, coming in below the national average of 15.12.

One key way to measure a bank's earnings is return on equity, or net income (profit, basically) divided by total equity. Melrose Co-operative Bank's most recent annualized quarterly return on equity was 5.68 percent, below the national average of 8.10 percent.

The bank recorded net income of $2.0 million on total equity of $36.0 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 0.70 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.