Safe and Sound

Bank of America, National Association

Charlotte, NC
4
Star Rating
Charlotte, NC-based Bank of America, National Association is an FDIC-insured bank started in 1904. As of June 30, 2017, the bank had equity of $206.99 billion on $1,705,928,000,000 in assets.

With 143,354 full-time employees in 4,637 offices in multiple states, the bank currently holds loans and leases worth $887.46 billion, including real estate loans of $320.78 billion. U.S. bank customers currently have $1.270 trillion in deposits with the bank.

Overall, Bankrate believes that, as of June 30, 2017, Bank of America, National Association exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a look at how the bank did on the three key criteria Bankrate used to grade U.S. banks.

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SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a bulwark against losses and affords protection for depositors during times of economic instability for the bank. It follows then that a bank's level of capital is an essential measurement of a bank's financial resilience. When it comes to safety and soundness, the more capital, the better.
Bank of America, National Association received a score of 8 out of a possible 30 points on our test to measure capital adequacy, lower than the national average of 13.38.

A bank's Tier 1 capital ratio is an important measure of this buffer. Bank of America, National Association's Tier 1 capital ratio was 12.85 percent, higher than the 6 percent level considered adequate by regulators, but under the national average of 25.16 percent. The higher the capital ratio, the better the bank will be able to stand up to economic challenges.

Overall, Bank of America, National Association held equity amounting to 12.13 percent of its assets, which exceeded the national average of 12.10 percent.

Asset Quality Score

Bankrate uses this test to estimate the impact of problem assets, such as unpaid loans, on the bank's loan loss reserves and overall capitalization.

A bank with extensive holdings of these kinds of assets may eventually be required to use capital to cover losses, reducing its buffer of equity. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, pushing down earnings and increasing the chances of a failure in the future.

Bank of America, National Association scored above the national average of 37.62 on Bankrate's asset quality test, racking up 40 out of a possible 40 points .

A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of June 30, 2017, 1.33 percent of Bank of America, National Association's loans were noncurrent -- in other words, they were more than 90 days past due or were in non-accrual status. That's above the national average of 1.04 percent.

Banks keep a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . That reserve's size can be a useful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on Bank of America, National Association's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability has an effect on its long-term survivability. Earnings may be retained by the bank, boosting its capital cushion, or be used to deal with problematic loans, potentially making the bank better prepared to withstand economic shocks. Conversely, losses lessen a bank's ability to do those things.

On Bankrate's earnings test, Bank of America, National Association scored 20 out of a possible 30, exceeding the national average of 16.52.

One important measure of a bank's earnings is return on equity, or net income (profit, basically) divided by the total amount of equity. The most recent annualized quarterly return on equity for Bank of America, National Association was 10.68 percent, above the national average of 9.28 percent.

The bank earned net income of $11.01 billion on total equity of $206.99 billion for the twelve months ended June 30, 2017. The bank had an annualized return on average assets, or ROA, of 1.30 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above the average for U.S. banks of 1.14 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.