Safe and Sound

Chelsea Groton Bank

Norwich, CT
4
Star Rating
Chelsea Groton Bank is a Norwich, CT-based, FDIC-insured bank that opened its doors in 1854. The bank holds equity of $161.5 million on assets of $1.07 billion, according to December 31, 2017, regulatory filings.

U.S. bank customers have $869.7 million on deposit at 14 offices in CT run by 212 full-time employees. With that footprint, the bank holds loans and leases worth $787.5 million, $719.9 million of which are for real estate.

Overall, Bankrate believes that, as of December 31, 2017, Chelsea Groton Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a breakdown of how the bank fared on the three key criteria Bankrate used to score American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital is an essential measurement of a bank's financial resilience. It acts as a buffer against losses and as protection for depositors when a bank is struggling financially. When it comes to safety and soundness, more capital is better.

Chelsea Groton Bank scored above the national average of 13.13 points on our test to measure capital adequacy, racking up 20 out of a possible 30 points.

One essential measure of this buffer is a bank's Tier 1 capital ratio. Chelsea Groton Bank's Tier 1 capital ratio was 18.54 percent, higher than the 6 percent level regulators consider adequate, but lower than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to economic difficulties.

Overall, Chelsea Groton Bank held equity amounting to 15.03 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 troubled assets, such as unpaid mortgages, on the bank's capitalization and allocated loan loss reserves.

Having large numbers of these types of assets may eventually force a bank to use capital to absorb losses, cutting down on its equity cushion. Many of those assets are also likely to be in non-accrual status and thus aren't earning interest for the bank, pushing down earnings and elevating the risk of a future failure.

On Bankrate's test of asset quality, Chelsea Groton Bank scored 40 out of a possible 40 points, above the national average of 37.49 points.

The percentage of problem assets a bank holds compared to its total assets is a handy indicator of asset quality.As of December 31, 2017, 1.00 percent of Chelsea Groton Bank's loans were noncurrent -- in other words, 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 the size of that reserve to the total amount of problem loans can be a widely used indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Chelsea Groton Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance has an effect on its safety and soundness. Earnings can be retained by the bank, expanding its capital cushion, or be used to address problematic loans, potentially making the bank better able to withstand financial shocks. Losses, on the other hand, lessen a bank's ability to do those things.

On Bankrate's test of earnings, Chelsea Groton Bank scored 8 out of a possible 30, coming in below the national average of 15.12.

Return on equity, calculated by dividing net income (essentially, profit) by total equity, is one important way to measure a bank's earnings. Chelsea Groton Bank's most recent annualized quarterly return on equity was 3.86 percent, below the national average of 8.10 percent.

The bank reported net income of $6.1 million on total equity of $161.5 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 0.57 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.