Safe and Sound

New Jersey Community Bank

1
Star Rating
Started in 2008, New Jersey Community Bank is an FDIC-insured bank based in Freehold, NJ. As of December 31, 2017, the bank had equity of $8.9 million on assets of $103.1 million.

U.S. bank customers have $93.7 million on deposit at 2 offices in NJ run by 21 full-time employees. With that footprint, the bank currently holds loans and leases worth $77.5 million, $77.9 million of which are for real estate.

Overall, Bankrate believes that, as of December 31, 2017, New Jersey Community Bank exhibited a significantly below-average condition, earning 1 out of 5 stars for safety and soundness. Keep reading for a breakdown of how the bank did on the three important criteria Bankrate used to grade American banks.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

Capital works as a buffer against losses and provides protection for depositors when a bank is experiencing financial instability. It follows then that a bank's level of capital is an important measurement of an institution's financial strength. From a safety and soundness perspective, the more capital, the better.

On our test to measure capital adequacy, New Jersey Community Bank received a score of 8 out of a possible 30 points, below the national average of 13.13.

One widely followed measure of this buffer is a bank's Tier 1 capital ratio. New Jersey Community Bank's Tier 1 capital ratio was 11.19 percent, higher than the 6 percent level regulators consider adequate, but below the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to economic headwinds.

Overall, New Jersey Community Bank held equity amounting to 8.65 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to estimate how the bank's loan loss reserves and overall capitalization could be affected by troubled assets, such as unpaid loans.

Having extensive holdings of these kinds of assets could eventually require a bank to use capital to cover losses, decreasing its equity buffer. Many of those assets are also likely to be in non-accrual status and thus aren't earning interest for the bank, reducing earnings and increasing the risk of a future failure.

New Jersey Community Bank fell short of the national average of 37.49 on Bankrate's test of asset quality, racking up 32 out of a possible 40 points .

The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of December 31, 2017, 1.89 percent of New Jersey Community 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 maintain a reserve known as an "allowance for loan and lease losses" to deal with problem assets . Comparing the reserve's size to the total amount of problematic loans can be a widely used indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on New Jersey Community Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its safety and soundness. Earnings can be retained by the bank, giving a boost to its capital buffer, or be used to address problematic loans, likely making the bank more resilient in tough times. Losses, on the other hand, lessen a bank's ability to do those things.

New Jersey Community Bank underperformed the average on Bankrate's test of earnings, achieving a score of 0 out of a possible 30.

One key measure of a bank's earnings is return on equity, or net income (profit, essentially) divided by the total amount of equity. The most recent annualized quarterly return on equity for New Jersey Community Bank was -12.62 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $-1.2 million on total equity of $8.9 million. The bank had an annualized return on average assets, or ROA, of -1.16 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.