Safe and Sound

E*TRADE Savings Bank

Arlington, VA
5
Star Rating
Arlington, VA-based E*TRADE Savings Bank is an FDIC-insured bank started in 2006. Regulatory filings show the bank having equity of $859.6 million on assets of $4.32 billion, as of December 31, 2017.

U.S. customers have $3.45 billion on deposit at the bank, which currently holds loans and leases worth $1.11 billion, including real estate loans of $45.0 million.

Overall, Bankrate believes that, as of December 31, 2017, E*TRADE Savings Bank 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 important criteria Bankrate used to grade American banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a bulwark against losses and affords protection for depositors when a bank is experiencing financial trouble. It follows then that a bank's level of capital is a useful measurement of an institution's financial resilience. From a safety and soundness perspective, the more capital, the better.

E*TRADE Savings Bank achieved a score of 30 out of a possible 30 points on our test to measure the adequacy of a bank's capital, beating out the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. E*TRADE Savings Bank's Tier 1 capital ratio was 111.11 percent, above the 6 percent level considered adequate by regulators, and higher than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to financial headwinds.

Overall, E*TRADE Savings Bank held equity amounting to 19.91 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 past-due loans, on the bank's capitalization and allocated loan loss reserves.

Having extensive holdings of these types of assets means a bank may eventually have to use capital to absorb losses, shrinking its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning money, resulting in diminished earnings and potentially more risk of a failure in the future.

On Bankrate's test of asset quality, E*TRADE Savings Bank scored 40 out of a possible 40 points, beating out the national average of 37.49 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, 0.25 percent of E*TRADE Savings Bank'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 keep 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 useful indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on E*TRADE Savings Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability has an effect on its safety and soundness. A bank can retain its earnings, boosting its capital cushion, or use them to address problematic loans, likely making the bank more resilient in times of trouble. Banks that are losing money, however, are less able to do those things.

E*TRADE Savings Bank 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 (profit, basically) by total equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for E*TRADE Savings Bank was 0.60 percent, below the national average of 8.10 percent.

The bank earned net income of $2.6 million on total equity of $859.6 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.10 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.