Safe and Sound

Mutual Bank

Whitman, MA
4
Star Rating
Mutual Bank is a Whitman, MA-based, FDIC-insured bank founded in 1889. As of December 31, 2017, the bank had equity of $43.8 million on assets of $510.9 million.

With 92 full-time employees in 9 offices in MA, the bank has amassed loans and leases worth $395.2 million, including real estate loans of $347.1 million. U.S. bank customers currently have $414.4 million in deposits with the bank.

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

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a buffer against losses and provides protection for account holders when a bank is struggling financially. It follows then that a bank's level of capital is an essential measurement of an institution's financial fortitude. From a safety and soundness perspective, the more capital, the better.

On our test to measure capital adequacy, Mutual Bank received a score of 8 out of a possible 30 points, below the national average of 13.13.

One widely used measure of this buffer is a bank's Tier 1 capital ratio. Mutual Bank's Tier 1 capital ratio was 12.86 percent, higher than the 6 percent level considered adequate by regulators, but lower than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather economic headwinds.

Overall, Mutual Bank held equity amounting to 8.56 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 impact of troubled assets, such as unpaid mortgages, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

Having lots of these kinds of assets could eventually force a bank to use capital to absorb losses, shrinking its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning money, reducing earnings and increasing the risk of a future failure.

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

A helpful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.42 percent of Mutual 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 helpful 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 Mutual Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability has an effect on its long-term survivability. A bank can retain its earnings, expanding its capital buffer, or put them to work addressing problematic loans, likely making the bank more resilient in times of trouble. Banks that are losing money, however, have less ability to do those things.

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

One widely used measure of a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by total equity. Mutual Bank's most recent annualized quarterly return on equity was 5.65 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $2.4 million on total equity of $43.8 million. The bank reported an annualized return on average assets, or ROA, of 0.49 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.