Safe and Sound

Providence Bank

Columbia, MO
5
Star Rating
Founded in 1888, Providence Bank is an FDIC-insured bank headquartered in Columbia, MO. Regulatory filings show the bank having equity of $146.4 million on $967.2 million in assets, as of December 31, 2017.

U.S. bank customers have $752.6 million on deposit at 13 offices in multiple states run by 198 full-time employees. With that footprint, the bank currently holds loans and leases worth $703.3 million, including real estate loans of $473.3 million.

Overall, Bankrate believes that, as of December 31, 2017, Providence Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for an analysis of how the bank fared on the three important criteria Bankrate used to score U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial fortitude, capital is important. It acts as a bulwark against losses and as protection for accountholders when a bank is struggling financially. When looking at safety and soundness, the higher the capital, the better.

Providence Bank racked up 18 out of a possible 30 points on our test to measure capital adequacy, beating out the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Providence Bank's Tier 1 capital ratio was 15.63 percent, higher than the 6 percent level regulators consider adequate, but lower than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather economic downturns.

Overall, Providence Bank held equity amounting to 15.14 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

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

Having extensive holdings of these kinds of assets means a bank may eventually 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 thus aren't earning money, diminishing earnings and elevating the risk of a future failure.

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

A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.21 percent of Providence 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 to deal with troubled assets known as an "allowance for loan and lease losses." The size of that reserve can be a helpful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on Providence Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its long-term survivability. Earnings may be retained by the bank, boosting its capital cushion, or be used 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 scored 14 out of a possible 30 on Bankrate's earnings test, falling short of the national average of 15.12.

One key measure of a bank's earnings is return on equity, or net income (essentially profit) divided by the total amount of equity. Providence Bank's most recent annualized quarterly return on equity was 6.82 percent, below the national average of 8.10 percent.

The bank recorded net income of $9.7 million on total equity of $146.4 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 1.02 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above 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.