Safe and Sound

Needham Bank

Needham, MA
4
Star Rating
Needham, MA-based Needham Bank is an FDIC-insured bank started in 1892. The bank holds equity of $261.0 million on $2.02 billion in assets, according to December 31, 2017, regulatory filings.

With 183 full-time employees in 10 offices in MA, the bank currently holds loans and leases worth $1.70 billion, including real estate loans of $1.66 billion. U.S. bank customers currently have $1.40 billion in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Needham 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 important criteria Bankrate used to grade U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial strength, capital is crucial. It works as a cushion against losses and as protection for accountholders when a bank is struggling financially. When looking at safety and soundness, more capital is preferred.

On our test to measure the adequacy of a bank's capital, Needham Bank achieved a score of 16 out of a possible 30 points, above the national average of 13.13.

A bank's Tier 1 capital ratio is an important measure of this buffer. Needham Bank's Tier 1 capital ratio was 17.83 percent, exceeding the 6 percent level regulators consider adequate, but below the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to financial challenges.

Overall, Needham Bank held equity amounting to 12.94 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to estimate how the bank's capitalization and allocated loan loss reserves could be affected by problem assets, such as unpaid mortgages.

Having lots of these kinds of assets may eventually require a bank to use capital to cover losses, shrinking its equity cushion. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, resulting in depressed earnings and potentially more risk of a failure in the future.

Needham 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, 1.07 percent of Needham Bank's loans were noncurrent, meaning 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 known as an "allowance for loan and lease losses" to deal with troubled assets . How large that reserve is can be a helpful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on Needham Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance has an effect on its safety and soundness. A bank can retain its earnings, increasing its capital buffer, or use them to deal with problematic loans, potentially making the bank better prepared to withstand economic trouble. Obviously, banks that are losing money have less ability to do those things.

Needham Bank scored 8 out of a possible 30 on Bankrate's test of earnings, coming in below the national average of 15.12.

Return on equity, calculated by dividing net income (essentially, profit) by the total amount of equity, is one key measure of a bank's earnings. The most recent annualized quarterly return on equity for Needham Bank was 3.58 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $9.2 million on total equity of $261.0 million. The bank experienced an annualized return on average assets, or ROA, of 0.46 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.