Safe and Sound

1880 Bank

Cambridge, MD
5
Star Rating
1880 Bank is a Cambridge, MD-based, FDIC-insured bank founded in 1880. The bank holds equity of $49.1 million on $354.6 million in assets, according to December 31, 2017, regulatory filings.

Thanks to the work of 50 full-time employees in 6 offices in MD, the bank holds loans and leases worth $246.7 million, including real estate loans of $211.7 million. The bank currently holds $299.8 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, 1880 Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a breakdown of how the bank fared on the three key criteria Bankrate used to grade American banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

Capital is a valuable measurement of an institution's financial strength. It works as a cushion against losses and as protection for accountholders during periods of financial instability for the bank. When it comes to safety and soundness, the more capital, the better.

1880 Bank scored 18 out of a possible 30 points on our test to measure the adequacy of a bank's capital, exceeding the national average of 13.13.

One widely followed measure of this buffer is a bank's Tier 1 capital ratio. 1880 Bank's Tier 1 capital ratio was 17.74 percent, higher than the 6 percent level regulators consider adequate, but under the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather financial challenges.

Overall, 1880 Bank held equity amounting to 13.85 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to estimate the effect of problem assets, such as unpaid loans, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

Having large numbers of these kinds of assets means a bank may have to use capital to absorb losses, diminishing its cushion of equity. Many of those assets are also likely to be in non-accrual status and no longer earning money, pushing down earnings and elevating the risk of a future failure.

1880 Bank finished below the national average of 37.49 on Bankrate's test of asset quality, racking up 36 out of a possible 40 points .

A handy indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 2.22 percent of 1880 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 troubled assets . Comparing the size of that reserve to the total amount of problematic loans can be a helpful indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on 1880 Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money affects its safety and soundness. A bank can retain its earnings, expanding its capital buffer, or put them to work addressing problematic loans, likely making the bank better able to withstand financial trouble. However, banks that are losing money are less able to do those things.

1880 Bank outperformed the average on Bankrate's test of earnings, achieving a score of 18 out of a possible 30.

One widely used way to measure a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by total equity. 1880 Bank's most recent annualized quarterly return on equity was 9.90 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $4.7 million on total equity of $49.1 million. The bank experienced an annualized return on average assets, or ROA, of 1.41 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above 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.