WHAT IS
SAFE AND SOUND?
Capital acts as a buffer against losses and as protection for account holders when a bank is struggling financially. Therefore, a bank's level of capital is a valuable measurement of an institution's financial fortitude. From a safety and soundness perspective, more capital is better.
Elmira Savings Bank finished below the national average of 13.13 on our test to measure the adequacy of a bank's capital, racking up 6 out of a possible 30 points.
A bank's Tier 1 capital ratio is a commonly used measure of this buffer. Elmira Savings Bank's Tier 1 capital ratio was 12.25 percent, exceeding the 6 percent level regulators consider adequate, but less than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to financial challenges.
Overall, Elmira Savings Bank held equity amounting to 10.21 percent of its assets, which was lower than the national average of 12.03 percent.
In this test, Bankrate tries to determine the impact of troubled assets, such as unpaid loans, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.
Having large numbers of these kinds of assets could eventually force a bank to use capital to cover losses, cutting down on its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, resulting in reduced earnings and potentially more risk of a future failure.
On Bankrate's test of asset quality, Elmira Savings Bank scored 40 out of a possible 40 points, better than the national average of 37.49 points.
The percentage of problem assets a bank holds compared to its total assets is a widely used indicator of asset quality.As of December 31, 2017, 0.63 percent of Elmira 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 problem loans can be a handy indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Elmira Savings Bank's loan loss allowance in its most recent filings.
How profitable a bank is affects its safety and soundness. Earnings may be retained by the bank, increasing its capital buffer, or be used to deal with problematic loans, likely making the bank more resilient in tough times. Obviously, banks that are losing money are less able to do those things.
On Bankrate's test of earnings, Elmira Savings Bank scored 18 out of a possible 30, above the national average of 15.12.
One key way to measure a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by the total amount of equity. The most recent annualized quarterly return on equity for Elmira Savings Bank was 8.11 percent, above the national average of 8.10 percent.
The bank recorded net income of $4.9 million on total equity of $56.7 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.86 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below the average for U.S. banks of 1.00 percent.
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.
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.