Safe and Sound

Prudential Bank

Philadelphia, PA
4
Star Rating
Prudential Bank is a Philadelphia, PA-based, FDIC-insured bank founded in 1886. As of December 31, 2017, the bank had equity of $125.0 million on $933.7 million in assets.

With 81 full-time employees in 11 offices in PA, the bank currently holds loans and leases worth $580.0 million, including real estate loans of $575.8 million. U.S. bank customers currently have $662.8 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Prudential Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a breakdown of how the bank fared on the three key criteria Bankrate used to evaluate American banks.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a buffer against losses and as protection for depositors when a bank is experiencing financial instability. Therefore, when it comes to measuring an a bank's financial resilience, capital is valuable. When it comes to safety and soundness, more capital is preferred.

Prudential Bank achieved a score of 16 out of a possible 30 points on our test to measure capital adequacy, above the national average of 13.13.

One widely used measure of this buffer is a bank's Tier 1 capital ratio. Prudential Bank's Tier 1 capital ratio was 20.93 percent, exceeding the 6 percent level considered adequate by regulators, but under the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to financial challenges.

Overall, Prudential Bank held equity amounting to 13.38 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to determine the impact of problem assets, such as unpaid loans, on the bank's loan loss reserves and overall capitalization.

A bank with lots of these kinds of assets could eventually be required 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, resulting in diminished earnings and potentially more risk of a failure in the future.

On Bankrate's test of asset quality, Prudential Bank scored 36 out of a possible 40 points, falling short of the national average of 37.49 points.

A helpful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 2.77 percent of Prudential Bank's loans were noncurrent -- in other words, 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 to deal with troubled assets known as an "allowance for loan and lease losses." How large that reserve is can be a useful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on Prudential Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its safety and soundness. Earnings can be retained by the bank, expanding its capital buffer, or be used to address problematic loans, likely making the bank more resilient in tough times. Obviously, banks that are losing money are less able to do those things.

Prudential Bank scored 6 out of a possible 30 on Bankrate's test of earnings, lower than the national average of 15.12.

Return on equity, calculated by dividing net income (essentially, profit) by total equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for Prudential Bank was 2.25 percent, below the national average of 8.10 percent.

The bank reported net income of $2.6 million on total equity of $125.0 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.31 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.