Safe and Sound

Bank of New England

Salem, NH
5
Star Rating
Bank of New England is a Salem, NH-based, FDIC-insured bank dating back to 1983. As of December 31, 2017, the bank had equity of $118.1 million on assets of $919.2 million.

U.S. bank customers have $798.3 million on deposit at 9 offices in multiple states run by 104 full-time employees. With that footprint, the bank has amassed loans and leases worth $795.1 million, $756.6 million of which are for real estate.

Overall, Bankrate believes that, as of December 31, 2017, Bank of New England exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a breakdown of how the bank did 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

When it comes to measuring an a bank's financial stability, capital is valuable. It works as a bulwark against losses and affords protection for depositors when a bank is struggling financially. When looking at safety and soundness, the more capital, the better.

Bank of New England exceeded the national average of 13.13 points on our test to measure the adequacy of a bank's capital, racking up 16 out of a possible 30 points.

One commonly used measure of this buffer is a bank's Tier 1 capital ratio. Bank of New England's Tier 1 capital ratio was 11.24 percent, exceeding the 6 percent level regulators consider adequate, but below the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to economic headwinds.

Overall, Bank of New England held equity amounting to 12.85 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to estimate how the bank's loan loss reserves and overall capitalization could be affected by troubled 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 money, pushing down earnings and elevating the chances of a future failure.

Bank of New England scored above the national average of 37.49 on Bankrate's asset quality test, racking up 40 out of a possible 40 points .

The percentage of problem assets a bank holds compared to its total assets is a handy indicator of asset quality.As of December 31, 2017, 0.22 percent of Bank of New England'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 troubled assets . That reserve's size can be a handy indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on Bank of New England's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability affects its safety and soundness. A bank can retain its earnings, giving a boost to its capital buffer, or use them to deal with problematic loans, likely making the bank more resilient in tough times. Losses, on the other hand, reduce a bank's ability to do those things.

Bank of New England scored 18 out of a possible 30 on Bankrate's earnings test, beating out the national average of 15.12.

One widely used measure of a bank's earnings is return on equity, or net income (profit, essentially) divided by total equity. The most recent annualized quarterly return on equity for Bank of New England was 10.27 percent, above the national average of 8.10 percent.

The bank earned net income of $11.6 million on total equity of $118.1 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 1.28 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.