Safe and Sound

Eastern Bank

Boston, MA
4
Star Rating
Eastern Bank is a Boston, MA-based, FDIC-insured bank started in 1989. As of December 31, 2017, the bank had equity of $1.32 billion on $10.87 billion in assets.

U.S. bank customers have $8.84 billion on deposit at 94 offices in multiple states run by 1,766 full-time employees. With that footprint, the bank has amassed loans and leases worth $8.16 billion, including $5.72 billion worth of real estate loans.

Overall, Bankrate believes that, as of December 31, 2017, Eastern Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a look at how the bank did on the three key criteria Bankrate used to grade American banks.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a buffer against losses and provides protection for account holders when a bank is experiencing economic trouble. It follows then that when it comes to measuring an a bank's financial fortitude, capital is essential. From a safety and soundness perspective, the higher the capital, the better.

Eastern Bank scored below the national average of 13.13 on our test to measure the adequacy of a bank's capital, receiving a score of 10 out of a possible 30 points.

A bank's Tier 1 capital ratio is a widely used measure of this buffer. Eastern Bank's Tier 1 capital ratio was 11.09 percent, higher than the 6 percent level considered adequate by regulators, but less than the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to economic challenges.

Overall, Eastern Bank held equity amounting to 12.17 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to estimate the effect of problem assets, such as unpaid mortgages, on the bank's capitalization and allocated loan loss reserves.

A bank with extensive holdings of these types of assets may eventually have to use capital to absorb losses, decreasing its cushion of equity. 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, resulting in diminished earnings and potentially more risk of a failure in the future.

On Bankrate's asset quality test, Eastern Bank scored 40 out of a possible 40 points, exceeding 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, 0.23 percent of Eastern 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 troubled assets . The size of that reserve can be a useful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on Eastern Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money has an effect on its long-term survivability. A bank can retain its earnings, increasing its capital buffer, or use them to address problematic loans, likely making the bank better able to withstand economic shocks. Losses, on the other hand, take away from a bank's ability to do those things.

Eastern Bank scored 14 out of a possible 30 on Bankrate's earnings test, coming in below the national average of 15.12.

Return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity, is one widely used measure of a bank's earnings. The most recent annualized quarterly return on equity for Eastern Bank was 6.70 percent, below the national average of 8.10 percent.

The bank recorded net income of $86.9 million on total equity of $1.32 billion for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 0.83 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.