Safe and Sound

Newburyport Five Cents Savings Bank

Newburyport, MA
5
Star Rating
Newburyport Five Cents Savings Bank is a Newburyport, MA-based, FDIC-insured bank dating back to 1854. As of December 31, 2017, the bank held equity of $122.7 million on $839.3 million in assets.

With 120 full-time employees in 9 offices in multiple states, the bank has amassed loans and leases worth $660.4 million, including real estate loans of $649.1 million. U.S. bank customers currently have $543.7 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Newburyport Five Cents Savings Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a breakdown of how the bank fared on the three important criteria Bankrate used to grade U.S. banks on safety and soundness.

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SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

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

Newburyport Five Cents Savings Bank scored above the national average of 13.13 points on our test to measure capital adequacy, achieving a score of 20 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Newburyport Five Cents Savings Bank's Tier 1 capital ratio was 16.69 percent, above the 6 percent level regulators consider adequate, but below the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to financial headwinds.

Overall, Newburyport Five Cents Savings Bank held equity amounting to 14.62 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to try to understand how the bank's loan loss reserves and overall capitalization could be affected by troubled assets, such as unpaid mortgages.

A bank with a large number of these types of assets could eventually be forced to use capital to cover 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 no longer earning interest for the bank, pushing down earnings and increasing the risk of a future failure.

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

A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.24 percent of Newburyport Five Cents 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 known as an "allowance for loan and lease losses" to deal with troubled assets . The size of that reserve can be a widely used indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on Newburyport Five Cents Savings Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money has an effect on its long-term survivability. A bank can retain its earnings, boosting its capital cushion, or use them to deal with problematic loans, likely making the bank more resilient in tough times. Losses, on the other hand, take away from a bank's ability to do those things.

Newburyport Five Cents Savings Bank scored 10 out of a possible 30 on Bankrate's earnings test, less than the national average of 15.12.

One key way to measure a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by the total amount of equity. The most recent annualized quarterly return on equity for Newburyport Five Cents Savings Bank was 4.58 percent, below the national average of 8.10 percent.

The bank recorded net income of $5.6 million on total equity of $122.7 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 0.71 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.