Two of the area’s smaller banks have earned top marks in financial stability.
Two of Maine’s smaller community banks ranked first and second in a financial stability rating of the state’s strongest banks.
Franklin Savings Bank in Farmington was ranked the strongest of Maine’s banks and thrifts and Mechanics Savings Bank in Auburn came in second. The ranking is compiled by Weiss Ratings Inc., which provides ratings and analyses of 15,000 financial services companies, including banks and thrifts. The rating is based on earnings from the first quarter of 2003.
“We have a long-standing philosophy of running a very conservative, well-managed institution with great people,” said Franklin President Gary Downs. “It’s something we pride ourselves on.”
Franklin Savings Bank has been listed among Maine’s strongest banks since at least December of 1999. Weiss gets its comparison data from federal regulator reports.
Weiss arrived at the ranking by comparing an institution’s assets, capital, income, liquidity and stability projections. Overall, the banking industry saw a record-breaking first quarter in 2003, with $29.4 billion reported in earnings. The first quarter of 2002 saw earnings of $25.4 billion.
Franklin reported more than $290 million in assets; a capital-to-leverage ratio of 19.22; non-performing loans to capital of 3.89; and a net income of $922,000. Its return on assets was 1.28.
Return on assets is figured by taking a bank’s income after taxes and dividing it by assets for the period in question. A rating of 1.0 is considered an industry benchmark for a healthy bank. David Proko, bank analyst for Weiss, said the company actually likes to see a rating higher than 1.0 to indicate a bank’s ability to weather a recession or other economic downturns.
Mechanics Savings Bank earned a 1.45 return on assets. It reported $193 million in assets; an 11.85 capital-to-leverage ratio; 3.95 non-performing loans to capital; and a net income of $702,000.
“The year 2002 was a fabulous year for us,” said Pat Kosalka, vice president of marketing for Mechanics. “We had net profits of over $2 million, which doubled those of 2001. … We’ve really taken off.”
Mechanics opened three new branches over the past four years, which helped increase its business. Last year it originated and sold 406 mortgages, totaling $46 million.
Mechanics, founded in 1875, and Franklin, founded in 1868, are small, community banks. Officials at both credit a conservative lending philosophy and knowledgeable employees among their non-financial assets.
The next three strongest banks in the Weiss ratings in Maine are Kennebunk Savings Bank in Kennebunk, Kennebec Savings Bank in Augusta and Machias Savings Bank in Machias.
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