Safe and Sound

Providence Bank & Trust

South Holland, IL
4
Star Rating
Founded in 2004, Providence Bank & Trust is an FDIC-insured bank based in South Holland, IL. Regulatory filings show the bank having equity of $59.5 million on assets of $565.4 million, as of December 31, 2017.

Thanks to the work of 122 full-time employees in 11 offices in multiple states, the bank holds loans and leases worth $445.3 million, including real estate loans of $338.9 million. The bank currently holds $480.3 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, Providence Bank & Trust exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a look at how the bank fared on the three important criteria Bankrate used to score American banks.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial fortitude, capital is useful. It acts as a bulwark against losses and affords protection for accountholders when a bank is struggling financially. From a safety and soundness perspective, more capital is preferred.

On our test to measure capital adequacy, Providence Bank & Trust received a score of 12 out of a possible 30 points, less than the national average of 13.13.

A bank's Tier 1 capital ratio is an important measure of this buffer. Providence Bank & Trust's Tier 1 capital ratio was 11.14 percent, higher than the 6 percent level considered adequate by regulators, but under the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather economic downturns.

Overall, Providence Bank & Trust held equity amounting to 10.52 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to determine the impact of troubled assets, such as past-due mortgages, on the bank's loan loss reserves and overall capitalization.

Having large numbers of these kinds of assets means a bank may have to use capital to absorb losses, reducing its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and no longer earning interest for the bank, decreasing earnings and elevating the chances of a failure in the future.

Providence Bank & Trust exceeded the national average of 37.49 on Bankrate's asset quality test, racking up 40 out of a possible 40 points .

The percentage of problem assets a bank holds compared to its total assets is a widely used indicator of asset quality.As of December 31, 2017, 0.20 percent of Providence Bank & Trust'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 keep a reserve to handle problem assets known as an "allowance for loan and lease losses." How large that reserve is can be a helpful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on Providence Bank & Trust's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its long-term survivability. A bank can retain its earnings, expanding its capital buffer, or use them to deal with problematic loans, likely making the bank more resilient in tough times. Obviously, banks that are losing money have less ability to do those things.

Providence Bank & Trust scored 14 out of a possible 30 on Bankrate's earnings test, below 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 the total amount of equity. Providence Bank & Trust's most recent annualized quarterly return on equity was 6.88 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $4.0 million on total equity of $59.5 million. The bank reported an annualized return on average assets, or ROA, of 0.73 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.