Safe and Sound

Norwood Co-operative Bank

Norwood, MA
5
Star Rating
Norwood Co-operative Bank is a Norwood, MA-based, FDIC-insured bank dating back to 1889. Regulatory filings show the bank having equity of $70.4 million on $485.4 million in assets, as of December 31, 2017.

With 50 full-time employees, the bank has amassed loans and leases worth $395.3 million, including real estate loans of $387.9 million. U.S. bank customers currently have $395.6 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Norwood Co-operative Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a look at how the bank did on the three key criteria Bankrate used to evaluate American banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a buffer against losses and as protection for account holders during periods of financial trouble for the bank. Therefore, when it comes to measuring an a bank's financial fortitude, capital is key. When it comes to safety and soundness, the more capital, the better.

Norwood Co-operative 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. Norwood Co-operative Bank's Tier 1 capital ratio was 19.09 percent, above the 6 percent level regulators consider adequate, but less than the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather financial challenges.

Overall, Norwood Co-operative Bank held equity amounting to 14.49 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to determine the effect of problem assets, such as past-due mortgages, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

Having large numbers of these kinds of assets may eventually force a bank 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 thus aren't earning interest for the bank, resulting in depressed earnings and potentially more risk of a failure in the future.

On Bankrate's test of asset quality, Norwood Co-operative Bank scored 40 out of a possible 40 points, better than 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, 0.01 percent of Norwood Co-operative Bank's loans were noncurrent -- in other words, 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 problem 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 widely used indicator when evaluating a bank's ability to manage problem assets. Norwood Co-operative Bank's loan loss allowance was 7,835.00 percent of its total noncurrent loans, exceeding the national average. All else being equal, the higher the ratio of loan loss allowance to noncurrent loans, the better.

Earnings score

How profitable a bank is affects its long-term survivability. Earnings may be retained by the bank, expanding its capital buffer, or be used to address problematic loans, potentially making the bank more resilient in times of trouble. However, banks that are losing money have less ability to do those things.

Norwood Co-operative Bank scored 12 out of a possible 30 on Bankrate's test of earnings, below the national average of 15.12.

Return on equity, calculated by dividing net income (profit, basically) by the total amount of equity, is one important measure of a bank's earnings. Norwood Co-operative Bank's most recent annualized quarterly return on equity was 5.22 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $3.6 million on total equity of $70.4 million. The bank reported an annualized return on average assets, or ROA, of 0.75 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.