Safe and Sound

Provident Bank

Jersey City, NJ
4
Star Rating
Provident Bank is a Jersey City, NJ-based, FDIC-insured bank started in 1839. Regulatory filings show the bank having equity of $1.23 billion on $9,538,985,000 in assets, as of June 30, 2017.

Thanks to the efforts of 1,007 full-time employees in 86 offices in multiple states, the bank has amassed loans and leases worth $6.97 billion, including real estate loans of $6.12 billion. The bank currently holds $6.54 billion in deposits from U.S. customers.

Overall, Bankrate believes that, as of June 30, 2017, Provident Bank exhibited a good condition, earning 4 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 score U.S. banks.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a cushion 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 crucial measurement of a bank's financial resilience. When looking at safety and soundness, the more capital, the better.
Provident Bank received a score of 8 out of a possible 30 points on our test to measure the adequacy of a bank's capital, falling short of the national average of 13.38.

A bank's Tier 1 capital ratio is a widely used measure of this buffer. Provident Bank's Tier 1 capital ratio was 11.35 percent, higher than the 6 percent level considered adequate by regulators, but less than the national average of 25.16 percent. A higher capital ratio means the bank will be better able to stand up to financial difficulties.

Overall, Provident Bank held equity amounting to 12.91 percent of its assets, which exceeded the national average of 12.10 percent.

Asset Quality Score

In this test, Bankrate tries to estimate the impact of problem assets, such as past-due loans, on the bank's capitalization and allocated loan loss reserves.

Having a large number of these types of assets suggests a bank may eventually have to use capital to absorb losses, diminishing its equity cushion. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, diminishing earnings and elevating the risk of a failure in the future.

Provident Bank scored 40 out of a possible 40 points on Bankrate's test of asset quality, beating the national average of 37.62.

The percentage of problem assets a bank holds compared to its total assets is a useful indicator of asset quality.As of June 30, 2017, 0.55 percent of Provident 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 1.04 percent.

Banks maintain a reserve to handle problem assets known as an "allowance for loan and lease losses." How large that reserve is can be a handy 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 Provident 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, expanding its capital buffer, or use them to address problematic loans, likely making the bank better able to withstand economic trouble. However, banks that are losing money have less ability to do those things.

On Bankrate's test of earnings, Provident Bank scored 16 out of a possible 30, lower than the national average of 16.52.

Return on equity, calculated by dividing net income (profit, basically) by the total amount of equity, is one key measure of a bank's earnings. The most recent annualized quarterly return on equity for Provident Bank was 7.91 percent, below the national average of 9.28 percent.

For the twelve months ended June 30, 2017, the bank recorded net income of $47.6 million on total equity of $1.23 billion. The bank had an annualized return on average assets, or ROA, of 1.00 percent, right at the level deemed satisfactory in accordance with industry standards, but below the average for U.S. banks of 1.14 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.