Safe and Sound

Somerset Savings Bank, SLA

Bound Brook, NJ
5
Star Rating
Bound Brook, NJ-based Somerset Savings Bank, SLA is an FDIC-insured bank founded in 1887. As of December 31, 2017, the bank had equity of $112.0 million on assets of $571.3 million.

With 69 full-time employees in 7 offices in NJ, the bank holds loans and leases worth $279.0 million, including real estate loans of $278.8 million. U.S. bank customers currently have $454.7 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Somerset Savings Bank, SLA 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 grade U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a bulwark against losses and provides protection for depositors when a bank is struggling financially. It follows then that a bank's level of capital is an essential measurement of a bank's financial resilience. When it comes to safety and soundness, the higher the capital, the better.

Somerset Savings Bank, SLA scored 30 out of a possible 30 points on our test to measure capital adequacy, exceeding the national average of 13.13.

One essential measure of this buffer is a bank's Tier 1 capital ratio. Somerset Savings Bank, SLA's Tier 1 capital ratio was 47.99 percent, above the 6 percent level regulators consider adequate, and exceeding the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to financial difficulties.

Overall, Somerset Savings Bank, SLA held equity amounting to 19.61 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 capitalization and allocated loan loss reserves could be affected by troubled assets, such as unpaid mortgages.

A bank with extensive holdings of these kinds of assets could eventually be required to use capital to cover losses, shrinking its buffer 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, diminishing earnings and elevating the chances of a future failure.

Somerset Savings Bank, SLA scored 40 out of a possible 40 points on Bankrate's asset quality test, beating out the national average of 37.49.

The percentage of problem assets a bank holds compared to its total assets is a handy indicator of asset quality.As of December 31, 2017, 0.15 percent of Somerset Savings Bank, SLA'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 deal with troubled assets known as an "allowance for loan and lease losses." The size of that reserve can be a handy 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 Somerset Savings Bank, SLA's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its long-term survivability. Earnings may be retained by the bank, boosting its capital buffer, or be used to deal with problematic loans, potentially making the bank more resilient in times of trouble. Losses, on the other hand, take away from a bank's ability to do those things.

Somerset Savings Bank, SLA did below-average on Bankrate's earnings test, achieving a score of 6 out of a possible 30.

Return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity, is one widely used measure of a bank's earnings. Somerset Savings Bank, SLA's most recent annualized quarterly return on equity was 2.14 percent, below the national average of 8.10 percent.

The bank reported net income of $2.4 million on total equity of $112.0 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.41 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.