Safe and Sound

Norway Savings Bank

Norway, ME
5
Star Rating
Started in 1866, Norway Savings Bank is an FDIC-insured bank headquartered in Norway, ME. As of December 31, 2017, the bank had equity of $165.1 million on assets of $1.13 billion.

U.S. bank customers have $923.2 million on deposit at 25 offices in ME run by 287 full-time employees. With that footprint, the bank has amassed loans and leases worth $918.7 million, including real estate loans of $799.9 million.

Overall, Bankrate believes that, as of December 31, 2017, Norway Savings Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's an analysis of how the bank fared on the three key criteria Bankrate used to score American banks on safety and soundness.

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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 experiencing financial instability. Therefore, a bank's level of capital is an essential measurement of a bank's financial strength. When looking at safety and soundness, the more capital, the better.

On our test to measure capital adequacy, Norway Savings Bank racked up 20 out of a possible 30 points, exceeding the national average of 13.13.

One widely followed measure of this buffer is a bank's Tier 1 capital ratio. Norway Savings Bank's Tier 1 capital ratio was 14.38 percent, higher than the 6 percent level regulators consider adequate, but lower than the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather economic downturns.

Overall, Norway Savings Bank held equity amounting to 14.55 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to estimate the effect of troubled assets, such as unpaid loans, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

A bank with a large number of these kinds of assets could eventually have to use capital to absorb losses, shrinking its cushion of equity. Many of those assets are also likely to be in non-accrual status and no longer earning money, decreasing earnings and increasing the chances of a future failure.

Norway Savings Bank scored 40 out of a possible 40 points on Bankrate's test of asset quality, better than the national average of 37.49.

A handy indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.30 percent of Norway 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 maintain a reserve to deal with troubled assets known as an "allowance for loan and lease losses." Comparing the size of that reserve to the total amount of at-risk loans can be a helpful indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Norway 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, expanding 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, lessen a bank's ability to do those things.

On Bankrate's earnings test, Norway Savings Bank scored 12 out of a possible 30, failing to reach the national average of 15.12.

Return on equity, calculated by dividing net income (essentially, profit) by total equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for Norway Savings Bank was 5.46 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $8.7 million on total equity of $165.1 million. The bank experienced an annualized return on average assets, or ROA, of 0.78 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.