Safe and Sound

Middlesex Savings Bank

Natick, MA
4
Star Rating
Middlesex Savings Bank is a Natick, MA-based, FDIC-insured bank founded in 1835. Regulatory filings show the bank having equity of $586.3 million on assets of $4.68 billion, as of December 31, 2017.

U.S. bank customers have $4.04 billion on deposit at 33 offices in MA run by 509 full-time employees. With that footprint, the bank has amassed loans and leases worth $3.07 billion, including $2.69 billion worth of real estate loans.

Overall, Bankrate believes that, as of December 31, 2017, Middlesex Savings Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a breakdown of how the bank fared on the three key criteria Bankrate used to score U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital is a valuable measurement of an institution's financial fortitude. It works as a cushion against losses and as protection for accountholders when a bank is struggling financially. When it comes to safety and soundness, the higher the capital, the better.

Middlesex Savings Bank exceeded the national average of 13.13 points on our test to measure the adequacy of a bank's capital, scoring 16 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Middlesex Savings Bank's Tier 1 capital ratio was 15.62 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, Middlesex Savings Bank held equity amounting to 12.52 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test is intended to try to understand how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by troubled assets, such as unpaid mortgages.

A bank with large numbers of these kinds of assets may eventually have to use capital to absorb losses, shrinking 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, decreasing earnings and elevating the risk of a failure in the future.

Middlesex Savings Bank beat out the national average of 37.49 on Bankrate's test of asset quality, racking up 40 out of a possible 40 points .

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, 0.43 percent of Middlesex Savings 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 handle troubled assets known as an "allowance for loan and lease losses." Comparing how large that reserve is to the total amount of problem loans can be a helpful indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Middlesex Savings 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. A bank can retain its earnings, giving a boost to its capital buffer, or put them to work addressing problematic loans, potentially making the bank better able to withstand economic trouble. Losses, on the other hand, diminish a bank's ability to do those things.

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

One important way to measure a bank's earnings is return on equity, or net income (essentially profit) divided by the total amount of equity. The most recent annualized quarterly return on equity for Middlesex Savings Bank was 5.75 percent, below the national average of 8.10 percent.

The bank recorded net income of $33.2 million on total equity of $586.3 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 0.72 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.