Safe and Sound

Somerset Trust Company

Somerset, PA
4
Star Rating
Somerset Trust Company is an FDIC-insured bank founded in 1889 and currently based in Somerset, PA. Regulatory filings show the bank having equity of $91.0 million on assets of $1.14 billion, as of December 31, 2017.

Thanks to the efforts of 335 full-time employees in 32 offices in multiple states, the bank holds loans and leases worth $735.0 million, including $444.8 million worth of real estate loans. U.S. bank customers currently have $904.2 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Somerset Trust Company exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a look at how the bank fared on the three major criteria Bankrate used to evaluate U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a bulwark against losses and affords protection for account holders during periods of economic trouble for the bank. It follows then that when it comes to measuring an a bank's financial fortitude, capital is key. When looking at safety and soundness, more capital is better.

Somerset Trust Company fell short of the national average of 13.13 on our test to measure the adequacy of a bank's capital, achieving a score of 6 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Somerset Trust Company's Tier 1 capital ratio was 10.73 percent, above the 6 percent level considered adequate by regulators, but less than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather financial downturns.

Overall, Somerset Trust Company held equity amounting to 7.96 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to try to understand how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by problem assets, such as past-due mortgages.

Having extensive holdings of these kinds of assets may eventually force a bank to use capital to absorb losses, reducing its equity cushion. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, resulting in depressed earnings and potentially more risk of a future failure.

Somerset Trust Company scored below the national average of 37.49 on Bankrate's test of asset quality, racking up 36 out of a possible 40 points .

The percentage of problem assets a bank holds compared to its total assets is a useful indicator of asset quality.As of December 31, 2017, 1.21 percent of Somerset Trust Company'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 keep a reserve known as an "allowance for loan and lease losses" to deal with problem assets . The size of that reserve can be a handy indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on Somerset Trust Company's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its safety and soundness. Earnings can be retained by the bank, boosting its capital cushion, or be used to deal with problematic loans, potentially making the bank more resilient in tough times. Conversely, losses lessen a bank's ability to do those things.

Somerset Trust Company exceeded the national average on Bankrate's test of earnings, achieving a score of 16 out of a possible 30.

Return on equity, calculated by dividing net income (essentially, profit) by the total amount of equity, is one key measure of a bank's earnings. Somerset Trust Company's most recent annualized quarterly return on equity was 7.65 percent, below the national average of 8.10 percent.

The bank earned net income of $6.6 million on total equity of $91.0 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.60 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.