WHAT IS
SAFE AND SOUND?
When it comes to measuring a credit union's financial strength, capital is valuable. It works as a bulwark against losses and affords protection for members when a credit union is experiencing financial trouble. When looking at safety and soundness, the higher the capital, the better.
On our test to measure capital adequacy, E.S.A. received a score of 6 out of a possible 30 points, failing to reach the national average of 15.65.
E.S.A. had a capitalization ratio of 6.00 percent in our test, less than the average for all credit unions, suggesting that it's less well prepared for financial trouble than its peers.
Bankrate uses this test to determine the effect of troubled assets, such as unpaid mortgages, on the credit union's capitalization and allocated loan loss reserves.
A credit union with a large number of these kinds of assets may eventually be required to use capital to cover losses, reducing its buffer of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, pushing down earnings and elevating the risk of a failure in the future.
E.S.A. scored above the national average of 38.09 on Bankrate's asset quality test, racking up 40 out of a possible 40 points .
The credit union's ratio of problem assets was 0.00 percent in our test, less than the national average and potentially indicative of superior financial strength compared to other credit unions.
A credit union's profitability has an effect on its safety and soundness. A credit union can retain its earnings, boosting its capital buffer, or put them to work addressing problematic loans, likely making the credit union more resilient in tough times. Obviously, credit unions that are losing money have less ability to do those things.
On Bankrate's test of earnings, E.S.A. scored 6 out of a possible 30, coming in below the national average of 10.11.
One sign that the credit union is running ahead of its peers in this area was its earnings ratio of 0.00 percent in our test, better than the average for all credit unions.
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.