Safe and Sound

East Boston Savings Bank

Boston, MA
5
Star Rating
Boston, MA-based East Boston Savings Bank is an FDIC-insured bank started in 1991. The bank has equity of $532.6 million on $5.23 billion in assets, according to December 31, 2017, regulatory filings.

With 495 full-time employees in 34 offices in MA, the bank currently holds loans and leases worth $4.63 billion, including real estate loans of $4.28 billion. U.S. bank customers currently have $4.13 billion in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, East Boston Savings Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a breakdown of how the bank fared on the three key criteria Bankrate used to score U.S. banks.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a cushion against losses and provides protection for depositors when a bank is experiencing financial trouble. It follows then that when it comes to measuring an a bank's financial strength, capital is valuable. When it comes to safety and soundness, the more capital, the better.

On our test to measure capital adequacy, East Boston Savings Bank received a score of 10 out of a possible 30 points, coming in below the national average of 13.19.

One essential measure of this buffer is a bank's Tier 1 capital ratio. East Boston Savings Bank's Tier 1 capital ratio was 10.39 percent, higher than the 6 percent level regulators consider adequate, but less than the national average of 25.67 percent. The higher the capital ratio, the better the bank will be able to stand up to economic headwinds.

Overall, East Boston Savings Bank held equity amounting to 10.18 percent of its assets, which was lower than the national average of 12.04 percent.

Asset Quality Score

Bankrate uses this test to estimate the effect of troubled assets, such as past-due mortgages, on the bank's loan loss reserves and overall capitalization.

Having large numbers of these kinds of assets means a bank may have to use capital to cover losses, cutting down on its equity cushion. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning interest for the bank, decreasing earnings and increasing the chances of a failure in the future.

East Boston Savings Bank scored above the national average of 37.70 on Bankrate's asset quality test, racking up 40 out of a possible 40 points .

A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.18 percent of East Boston 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 1.14 percent.

Banks keep a reserve to deal with problem assets known as an "allowance for loan and lease losses." That reserve's size 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 East Boston Savings Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its long-term survivability. A bank can retain its earnings, boosting its capital cushion, or put them to work addressing problematic loans, potentially 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 earnings test, East Boston Savings Bank scored 18 out of a possible 30, beating out the national average of 16.06.

One widely used measure of a bank's earnings is return on equity, calculated by dividing net income (profit, basically) by total equity. The most recent annualized quarterly return on equity for East Boston Savings Bank was 8.68 percent, above the national average of 8.10 percent.

The bank reported net income of $43.0 million on total equity of $532.6 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.90 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.