Safe and Sound

Prime Bank

Orange, CT
4
Star Rating
Prime Bank is an Orange, CT-based, FDIC-insured bank dating back to 1990. Regulatory filings show the bank having equity of $9.7 million on $68.1 million in assets, as of December 31, 2017.

Thanks to the work of 7 full-time employees, the bank currently holds loans and leases worth $24.9 million, including real estate loans of $8.3 million. U.S. bank customers currently have $51.3 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Prime Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a look at how the bank fared on the three major criteria Bankrate used to grade U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a buffer against losses and affords protection for depositors when a bank is struggling financially. It follows then that a bank's level of capital is a useful measurement of an institution's financial fortitude. From a safety and soundness perspective, the higher the capital, the better.

Prime Bank achieved a score of 20 out of a possible 30 points on our test to measure capital adequacy, beating out the national average of 13.13.

One widely used measure of this buffer is a bank's Tier 1 capital ratio. Prime Bank's Tier 1 capital ratio was 22.54 percent, exceeding the 6 percent level considered adequate by regulators, but lower than the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather financial headwinds.

Overall, Prime Bank held equity amounting to 14.23 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to estimate how the bank's capitalization and allocated loan loss reserves could be affected by problem assets, such as past-due mortgages.

Having extensive holdings of these kinds of assets means a bank may eventually have to use capital to cover losses, shrinking its buffer of equity. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning interest for the bank, diminishing earnings and increasing the risk of a failure in the future.

On Bankrate's asset quality test, Prime Bank scored 36 out of a possible 40 points, below 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, 1.39 percent of Prime 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 helpful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on Prime 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. A bank can retain its earnings, boosting its capital buffer, or use them to address problematic loans, likely making the bank more resilient in times of trouble. Obviously, banks that are losing money are less able to do those things.

Prime Bank scored 10 out of a possible 30 on Bankrate's earnings test, falling short of the national average of 15.12.

One important 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 Prime Bank was 5.07 percent, below the national average of 8.10 percent.

The bank recorded net income of $448,000 on total equity of $9.7 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 0.62 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.