Safe and Sound

Eastern Savings Bank

Norwich, CT
2
Star Rating
Eastern Savings Bank is a Norwich, CT-based, FDIC-insured bank that opened its doors in 1915. The bank holds equity of $15.5 million on assets of $182.9 million, according to December 31, 2017, regulatory filings.

Thanks to the efforts of 48 full-time employees in 5 offices in CT, the bank has amassed loans and leases worth $156.0 million, $141.6 million of which are for real estate. The bank currently holds $147.9 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, Eastern Savings Bank exhibited a below-average condition, earning 2 out of 5 stars for safety and soundness. Here's a look at how the bank fared on the three important criteria Bankrate used to grade U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a cushion against losses and affords protection for depositors when a bank is experiencing economic instability. Therefore, a bank's level of capital is an essential measurement of an institution's financial strength. From a safety and soundness perspective, more capital is better.

Eastern Savings Bank scored below the national average of 13.13 on our test to measure the adequacy of a bank's capital, achieving a score of 8 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Eastern Savings Bank's Tier 1 capital ratio was 11.11 percent, above the 6 percent level considered adequate by regulators, but lower than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather financial challenges.

Overall, Eastern Savings Bank held equity amounting to 8.46 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to determine the effect of problem assets, such as past-due loans, on the bank's capitalization and allocated loan loss reserves.

Having lots of these types of assets means a bank could have to use capital to absorb losses, diminishing its buffer 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, pushing down earnings and increasing the risk of a future failure.

On Bankrate's asset quality test, Eastern Savings Bank scored 32 out of a possible 40 points, falling short of the national average of 37.49 points.

The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of December 31, 2017, 1.82 percent of Eastern Savings Bank's loans were noncurrent -- in other words, they were more than 90 days past due or were in non-accrual status. That's above the national average of 1.01 percent.

Banks maintain a reserve to deal with troubled assets known as an "allowance for loan and lease losses." That reserve's size can be a widely used 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 Eastern Savings Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money has an effect on its safety and soundness. Earnings may be retained by the bank, boosting its capital buffer, or be used to address problematic loans, likely making the bank more resilient in times of trouble. Conversely, losses diminish a bank's ability to do those things.

Eastern Savings Bank scored 0 out of a possible 30 on Bankrate's test of earnings, failing to reach the national average of 15.12.

One important measure of a bank's earnings is return on equity, or net income (profit, basically) divided by total equity. Eastern Savings Bank's most recent annualized quarterly return on equity was -3.63 percent, below the national average of 8.10 percent.

The bank recorded net income of $-579,000 on total equity of $15.5 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of -0.31 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.