Safe and Sound

Methuen Co-operative Bank

Methuen, MA
4
Star Rating
Started in 1923, Methuen Co-operative Bank is an FDIC-insured bank headquartered in Methuen, MA. The bank has equity of $9.3 million on $89.7 million in assets, according to December 31, 2017, regulatory filings.

With 15 full-time employees, the bank has amassed loans and leases worth $54.5 million, including real estate loans of $52.7 million. U.S. bank customers currently have $80.2 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Methuen Co-operative 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 grade American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a cushion against losses and provides protection for depositors when a bank is struggling financially. Therefore, when it comes to measuring an a bank's financial strength, capital is important. From a safety and soundness perspective, the higher the capital, the better.

On our test to measure the adequacy of a bank's capital, Methuen Co-operative Bank received a score of 12 out of a possible 30 points, failing to reach the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Methuen Co-operative Bank's Tier 1 capital ratio was 23.43 percent, higher than the 6 percent level considered adequate by regulators, but less than 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, Methuen Co-operative Bank held equity amounting to 10.38 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to estimate how the bank's loan loss reserves and overall capitalization could be affected by troubled assets, such as past-due mortgages.

Having large numbers of these types of assets could eventually require a bank to use capital to absorb losses, cutting down on its equity cushion. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning interest for the bank, resulting in reduced earnings and potentially more risk of a failure in the future.

Methuen Co-operative Bank did better than 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 helpful indicator of asset quality.As of December 31, 2017, 1.25 percent of Methuen Co-operative Bank's loans were noncurrent -- in other words, 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 maintain a reserve to deal with troubled assets known as an "allowance for loan and lease losses." Comparing the size of that reserve to the total amount of problematic loans can be a handy indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Methuen Co-operative Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its long-term survivability. Earnings can be retained by the bank, boosting its capital cushion, or be used to deal with problematic loans, likely making the bank more resilient in tough times. However, banks that are losing money are less able to do those things.

On Bankrate's earnings test, Methuen Co-operative Bank scored 4 out of a possible 30, falling short of the national average of 15.12.

Return on equity, calculated by dividing net income (profit, essentially) by total equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for Methuen Co-operative Bank was 1.76 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $163,000 on total equity of $9.3 million. The bank experienced an annualized return on average assets, or ROA, of 0.18 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.