Essex Bank

THE INSTITUTION'S SCORE

Capital Score

Capital works as a buffer against losses and as protection for depositors during periods of financial trouble for the bank. Therefore, when it comes to measuring an an institution's financial stability, capital is useful. When it comes to safety and soundness, more capital is better.

Essex Bank fell short of the national average of 13.13 on our test to measure the adequacy of a bank's capital, scoring 10 out of a possible 30 points.

One widely followed measure of this buffer is a bank's Tier 1 capital ratio. Essex Bank's Tier 1 capital ratio was 11.70 percent, exceeding the 6 percent level considered adequate by regulators, but under the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to financial downturns.

Overall, Essex Bank held equity amounting to 9.45 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

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

A bank with extensive holdings of these types of assets could eventually be required to use capital to absorb losses, decreasing 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, decreasing earnings and elevating the risk of a failure in the future.

On Bankrate's test of asset quality, Essex Bank scored 36 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 widely used indicator of asset quality.As of December 31, 2017, 1.15 percent of Essex Bank's loans were noncurrent, meaning 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 keep a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . 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 problem loans. Unfortunately, the FDIC did not provide information on Essex Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its safety and soundness. Earnings may be retained by the bank, expanding its capital buffer, or be used to address problematic loans, likely making the bank more resilient in tough times. Obviously, banks that are losing money are less able to do those things.

Essex Bank scored 12 out of a possible 30 on Bankrate's test of earnings, lower than the national average of 15.12.

Return on equity, calculated by dividing net income (profit, basically) by total equity, is one widely used measure of a bank's earnings. Essex Bank's most recent annualized quarterly return on equity was 6.13 percent, below the national average of 8.10 percent.

The bank recorded net income of $7.5 million on total equity of $126.2 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 0.59 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below the average for U.S. banks of 1.00 percent.