Safe and Sound

Ion Bank

Naugatuck, CT
3
Star Rating
Ion Bank is a Naugatuck, CT-based, FDIC-insured bank started in 1870. As of December 31, 2017, the bank held equity of $115.9 million on assets of $1.27 billion.

Thanks to the work of 241 full-time employees in 21 offices in CT, the bank currently holds loans and leases worth $1.03 billion, including real estate loans of $783.3 million. U.S. bank customers currently have $1.03 billion in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Ion Bank exhibited a generally satisfactory condition, earning 3 out of 5 stars for safety and soundness. Keep reading for an analysis of how the bank fared on the three major criteria Bankrate used to grade American banks.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial stability, capital is valuable. It acts as a bulwark against losses and affords protection for accountholders when a bank is experiencing financial instability. When it comes to safety and soundness, the higher the capital, the better.

Ion Bank received a score of 8 out of a possible 30 points on our test to measure the adequacy of a bank's capital, less than the national average of 13.13.

One important measure of this buffer is a bank's Tier 1 capital ratio. Ion Bank's Tier 1 capital ratio was 12.85 percent, higher than 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 stand up to economic difficulties.

Overall, Ion Bank held equity amounting to 9.16 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test is intended to try to understand how the bank's loan loss reserves and overall capitalization could be affected by problem assets, such as unpaid mortgages.

Having lots of these types of assets may eventually require a bank to use capital to cover losses, decreasing its cushion of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning interest for the bank, resulting in reduced earnings and potentially more risk of a failure in the future.

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

A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.81 percent of Ion 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 maintain 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 useful indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Ion Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability has an effect on its long-term survivability. Earnings can be retained by the bank, giving a boost to its capital cushion, or be used to address problematic loans, potentially making the bank better prepared to withstand economic trouble. Losses, on the other hand, take away from a bank's ability to do those things.

On Bankrate's earnings test, Ion Bank scored 6 out of a possible 30, failing to reach the national average of 15.12.

One widely used measure of a bank's earnings is return on equity, or net income (essentially profit) divided by total equity. Ion Bank's most recent annualized quarterly return on equity was 3.07 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $3.3 million on total equity of $115.9 million. The bank experienced an annualized return on average assets, or ROA, of 0.26 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.