Safe and Sound

Putnam Bank

Putnam, CT
4
Star Rating
Started in 1862, Putnam Bank is an FDIC-insured bank headquartered in Putnam, CT. The bank holds equity of $69.1 million on assets of $525.8 million, according to December 31, 2017, regulatory filings.

U.S. bank customers have $367.1 million on deposit at 8 offices in CT run by 98 full-time employees. With that footprint, the bank currently holds loans and leases worth $339.3 million, $322.7 million of which are for real estate.

Overall, Bankrate believes that, as of December 31, 2017, Putnam 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 important criteria Bankrate used to grade U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital is a useful measurement of a bank's financial fortitude. It works as a cushion against losses and provides protection for depositors when a bank is struggling financially. When it comes to safety and soundness, the higher the capital, the better.

Putnam Bank scored above the national average of 13.13 points on our test to measure capital adequacy, receiving a score of 14 out of a possible 30 points.

One commonly used measure of this buffer is a bank's Tier 1 capital ratio. Putnam Bank's Tier 1 capital ratio was 18.51 percent, exceeding the 6 percent level considered adequate by regulators, but lower than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather economic challenges.

Overall, Putnam Bank held equity amounting to 13.14 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

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

Having lots of these kinds of assets may eventually force a bank to use capital to cover losses, reducing its cushion 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, resulting in reduced earnings and potentially more risk of a future failure.

Putnam Bank fell short of the national average of 37.49 on Bankrate's test of asset quality, racking up 36 out of a possible 40 points .

A handy indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 1.35 percent of Putnam 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 maintain a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . How large that reserve is can be a widely used 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 Putnam Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its safety and soundness. Earnings may be retained by the bank, expanding its capital cushion, or be used to deal with problematic loans, likely making the bank better prepared to withstand financial trouble. Losses, on the other hand, lessen a bank's ability to do those things.

Putnam Bank scored 8 out of a possible 30 on Bankrate's test of earnings, falling short of the national average of 15.12.

Return on equity, calculated by dividing net income (profit, essentially) by total equity, is one important way to measure a bank's earnings. Putnam Bank's most recent annualized quarterly return on equity was 3.76 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $2.6 million on total equity of $69.1 million. The bank experienced an annualized return on average assets, or ROA, of 0.50 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.