Safe and Sound

The Lowell Five Cent Savings Bank

Lowell, MA
5
Star Rating
The Lowell Five Cent Savings Bank is a Lowell, MA-based, FDIC-insured bank dating back to 1854. Regulatory filings show the bank having equity of $131.9 million on assets of $1.11 billion, as of December 31, 2017.

With 211 full-time employees in 16 offices in multiple states, the bank has amassed loans and leases worth $867.3 million, including real estate loans of $813.8 million. U.S. bank customers currently have $955.2 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, The Lowell Five Cent Savings Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's an analysis of how the bank did on the three important criteria Bankrate used to grade U.S. banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial strength, capital is valuable. It acts as a cushion against losses and provides protection for depositors when a bank is struggling financially. From a safety and soundness perspective, more capital is preferred.

The Lowell Five Cent Savings Bank beat out the national average of 13.13 points on our test to measure capital adequacy, receiving a score of 14 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. The Lowell Five Cent Savings Bank's Tier 1 capital ratio was 13.43 percent, higher than the 6 percent level considered adequate by regulators, but less than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather economic downturns.

Overall, The Lowell Five Cent Savings Bank held equity amounting to 11.91 percent of its assets, which was lower than 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 loans, on the bank's capitalization and allocated loan loss reserves.

Having a large number of these types of assets may eventually force a bank to use capital to cover losses, cutting down on its cushion of equity. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning interest for the bank, diminishing earnings and increasing the risk of a future failure.

The Lowell Five Cent Savings Bank scored 40 out of a possible 40 points on Bankrate's asset quality test, beating out the national average of 37.49.

A helpful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.21 percent of The Lowell Five Cent Savings 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 keep a reserve to handle problem assets known as an "allowance for loan and lease losses." Comparing the reserve's size to the total amount of at-risk loans can be a widely used indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on The Lowell Five Cent Savings Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its long-term survivability. A bank can retain its earnings, expanding its capital cushion, or put them to work addressing problematic loans, likely making the bank better prepared to withstand financial shocks. Obviously, banks that are losing money are less able to do those things.

On Bankrate's earnings test, The Lowell Five Cent Savings Bank scored 18 out of a possible 30, beating 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 The Lowell Five Cent Savings Bank was 8.36 percent, above the national average of 8.10 percent.

The bank earned net income of $10.8 million on total equity of $131.9 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.98 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.