Safe and Sound

Middlesex Federal Savings, F.A.

Somerville, MA
3
Star Rating
Middlesex Federal Savings, F.A. is an FDIC-insured bank founded in 1890 and currently based in Somerville, MA. Regulatory filings show the bank having equity of $37.5 million on $406.2 million in assets, as of December 31, 2017.

U.S. bank customers have $278.1 million on deposit at 3 offices in MA run by 47 full-time employees. With that footprint, the bank holds loans and leases worth $322.0 million, $317.7 million of which are for real estate.

Overall, Bankrate believes that, as of December 31, 2017, Middlesex Federal Savings, F.A. exhibited a generally satisfactory condition, earning 3 out of 5 stars for safety and soundness. Here's an analysis of how the bank did on the three key criteria Bankrate used to evaluate U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a cushion against losses and as protection for account holders when a bank is struggling financially. Therefore, when it comes to measuring an an institution's financial stability, capital is crucial. When it comes to safety and soundness, the more capital, the better.

On our test to measure the adequacy of a bank's capital, Middlesex Federal Savings, F.A. received a score of 10 out of a possible 30 points, coming in below the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Middlesex Federal Savings, F.A.'s Tier 1 capital ratio was 13.47 percent, above the 6 percent level regulators consider adequate, but under the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather financial downturns.

Overall, Middlesex Federal Savings, F.A. held equity amounting to 9.24 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to estimate the impact of troubled 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 large numbers of these types of assets could eventually be forced to use capital to cover losses, decreasing 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 money, pushing down earnings and increasing the chances of a failure in the future.

Middlesex Federal Savings, F.A. scored above 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 handy indicator of asset quality.As of December 31, 2017, 0.35 percent of Middlesex Federal Savings, F.A.'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 handle problem assets known as an "allowance for loan and lease losses." Comparing the reserve's size 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 Middlesex Federal Savings, F.A.'s loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance has an effect on its safety and soundness. Earnings may be retained by the bank, boosting its capital buffer, or be used to address problematic loans, potentially making the bank better able to withstand economic shocks. Losses, on the other hand, diminish a bank's ability to do those things.

Middlesex Federal Savings, F.A. scored 0 out of a possible 30 on Bankrate's test of earnings, falling short of the national average of 15.12.

One widely used measure of a bank's earnings is return on equity, or net income (profit, basically) divided by total equity. Middlesex Federal Savings, F.A.'s most recent annualized quarterly return on equity was -1.95 percent, below the national average of 8.10 percent.

The bank recorded net income of $-759,000 on total equity of $37.5 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of -0.19 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.