Safe and Sound

Skowhegan Savings Bank

Skowhegan, ME
4
Star Rating
Skowhegan Savings Bank is a Skowhegan, ME-based, FDIC-insured bank that opened its doors in 1869. The bank holds equity of $84.2 million on assets of $597.1 million, according to December 31, 2017, regulatory filings.

U.S. bank customers have $461.2 million on deposit at 16 offices in ME run by 130 full-time employees. With that footprint, the bank has amassed loans and leases worth $460.3 million, $354.4 million of which are for real estate.

Overall, Bankrate believes that, as of December 31, 2017, Skowhegan Savings 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 key criteria Bankrate used to evaluate U.S. banks.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

Capital is a valuable measurement of an institution's financial fortitude. It acts as a cushion against losses and affords protection for depositors when a bank is experiencing financial trouble. When looking at safety and soundness, the more capital, the better.

Skowhegan Savings Bank did better than the national average of 13.13 points on our test to measure the adequacy of a bank's capital, achieving a score of 18 out of a possible 30 points.

A bank's Tier 1 capital ratio is a widely followed measure of this buffer. Skowhegan Savings Bank's Tier 1 capital ratio was 17.48 percent, above 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 stand up to economic headwinds.

Overall, Skowhegan Savings Bank held equity amounting to 14.11 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to determine the impact of troubled assets, such as past-due loans, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

A bank with lots of these types of assets could eventually have to use capital to absorb losses, shrinking its equity cushion. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, reducing earnings and increasing the risk of a future failure.

Skowhegan Savings Bank fell short of the national average of 37.49 on Bankrate's test of asset quality, racking up 36 out of a possible 40 points .

The percentage of problem assets a bank holds compared to its total assets is a widely used indicator of asset quality.As of December 31, 2017, 1.32 percent of Skowhegan Savings 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 keep a reserve known as an "allowance for loan and lease losses" to deal with problem assets . How large that reserve is can be a useful 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 Skowhegan Savings Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its safety and soundness. Earnings may be retained by the bank, expanding its capital buffer, or be used to deal with problematic loans, potentially making the bank more resilient in tough times. Obviously, banks that are losing money have less ability to do those things.

Skowhegan Savings Bank underperformed the average on Bankrate's earnings test, achieving a score of 10 out of a possible 30.

One important measure of a bank's earnings is return on equity, or net income (profit, essentially) divided by total equity. Skowhegan Savings Bank's most recent annualized quarterly return on equity was 4.89 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $4.0 million on total equity of $84.2 million. The bank experienced an annualized return on average assets, or ROA, of 0.68 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.