Safe and Sound

Bank of New Castle

New Castle, DE
5
Star Rating
Bank of New Castle is a New Castle, DE-based, FDIC-insured bank founded in 1989. Regulatory filings show the bank having equity of $17.0 million on assets of $17.5 million, as of December 31, 2017.

The bank has loans and leases worth $16.8 million, including $0 worth of real estate loans. U.S. bank customers currently have $500,000 in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Bank of New Castle exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a look at how the bank fared on the three major criteria Bankrate used to score U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital is an essential measurement of a bank's financial fortitude. It works as a bulwark against losses and as protection for accountholders when a bank is experiencing financial trouble. When looking at safety and soundness, more capital is preferred.

Bank of New Castle beat out the national average of 13.13 points on our test to measure capital adequacy, scoring 30 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Bank of New Castle's Tier 1 capital ratio was 484.18 percent, exceeding the 6 percent level considered adequate by regulators, and above the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to economic downturns.

Overall, Bank of New Castle held equity amounting to 96.89 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

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

A bank with a large number of these types of assets may eventually have to use capital to absorb losses, decreasing 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 interest for the bank, resulting in reduced earnings and potentially more risk of a future failure.

Bank of New Castle exceeded the national average of 37.49 on Bankrate's test of asset quality, 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 December 31, 2017, none of Bank of New Castle's loans were noncurrent, meaning 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 maintain a reserve known as an "allowance for loan and lease losses" to deal with problem assets . Comparing how large that reserve is 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 Bank of New Castle'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, increasing its capital buffer, or use them to deal with problematic loans, potentially making the bank more resilient in tough times. Obviously, banks that are losing money have less ability to do those things.

Bank of New Castle underperformed the average on Bankrate's test of earnings, achieving a score of 2 out of a possible 30.

Return on equity, calculated by dividing net income (essentially, profit) by the total amount of equity, is one widely used measure of a bank's earnings. Bank of New Castle's most recent annualized quarterly return on equity was 0.50 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $85,000 on total equity of $17.0 million. The bank experienced an annualized return on average assets, or ROA, of 0.49 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.