Safe and Sound

Bank of England

England, AR
5
Star Rating
England, AR-based Bank of England is an FDIC-insured bank founded in 1898. Regulatory filings show the bank having equity of $48.3 million on $316.4 million in assets, as of December 31, 2017.

U.S. bank customers have $235.5 million on deposit at 31 offices in multiple states run by 1,080 full-time employees. With that footprint, the bank currently holds loans and leases worth $254.2 million, $211.8 million of which are for real estate.

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

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital is a crucial measurement of a bank's financial resilience. It works as a bulwark against losses and as protection for accountholders when a bank is experiencing financial instability. When looking at safety and soundness, more capital is better.

Bank of England scored 16 out of a possible 30 points on our test to measure capital adequacy, better than the national average of 13.13.

One important measure of this buffer is a bank's Tier 1 capital ratio. Bank of England's Tier 1 capital ratio was 25.40 percent, exceeding the 6 percent level regulators consider adequate, but lower than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to economic difficulties.

Overall, Bank of England held equity amounting to 15.28 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to try to understand how the bank's loan loss reserves and overall capitalization could be affected by problem assets, such as unpaid loans.

A bank with a large number of these kinds of assets may eventually be forced to use capital to cover 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, diminishing earnings and increasing the chances of a future failure.

Bank of England 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 .

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, 0.44 percent of Bank of England'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 known as an "allowance for loan and lease losses" to deal with problem assets . How large that reserve is can be a handy indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on Bank of England's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its safety and soundness. A bank can retain its earnings, expanding its capital cushion, or use them to deal with problematic loans, likely making the bank better prepared to withstand economic shocks. However, banks that are losing money are less able to do those things.

On Bankrate's test of earnings, Bank of England scored 22 out of a possible 30, exceeding the national average of 15.12.

One key measure of a bank's earnings is return on equity, calculated by dividing net income (profit, basically) by the total amount of equity. The most recent annualized quarterly return on equity for Bank of England was 13.20 percent, above the national average of 8.10 percent.

The bank recorded net income of $6.3 million on total equity of $48.3 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 1.98 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.