Safe and Sound

The Provident Bank

Amesbury, MA
4
Star Rating
The Provident Bank is an Amesbury, MA-based, FDIC-insured bank started in 1828. The bank holds equity of $107.6 million on assets of $901.7 million, according to December 31, 2017, regulatory filings.

Thanks to the efforts of 126 full-time employees in 8 offices in multiple states, the bank currently holds loans and leases worth $742.1 million, $495.4 million of which are for real estate. The bank currently holds $754.7 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, The 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 fared on the three important criteria Bankrate used to score U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital is an essential measurement of an institution's financial fortitude. It works as a cushion against losses and as protection for accountholders during periods of economic trouble for the bank. From a safety and soundness perspective, the more capital, the better.

On our test to measure the adequacy of a bank's capital, The Provident Bank scored 14 out of a possible 30 points, better than the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. The Provident Bank's Tier 1 capital ratio was 13.71 percent, higher than the 6 percent level considered adequate by regulators, but below the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather financial downturns.

Overall, The Provident Bank held equity amounting to 11.94 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to estimate the effect of problem assets, such as past-due mortgages, on the bank's capitalization and allocated loan loss reserves.

Having large numbers of these kinds of assets may eventually force a bank to use capital to cover losses, decreasing its cushion of equity. Many of those assets are also likely to be in non-accrual status and no longer earning money, pushing down earnings and increasing the chances of a future failure.

On Bankrate's asset quality test, The Provident Bank scored 36 out of a possible 40 points, failing to reach the national average of 37.49 points.

The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of December 31, 2017, 1.20 percent of The Provident 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 keep a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . Comparing how large that reserve is to the total amount of at-risk loans can be a helpful indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on The 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. Earnings may be retained by the bank, increasing its capital cushion, or be used to deal with problematic loans, likely making the bank more resilient in tough times. Conversely, losses take away from a bank's ability to do those things.

On Bankrate's earnings test, The Provident Bank scored 16 out of a possible 30, better than the national average of 15.12.

Return on equity, calculated by dividing net income (profit, basically) by the total amount of equity, is one important way to measure a bank's earnings. The Provident Bank's most recent annualized quarterly return on equity was 7.53 percent, below the national average of 8.10 percent.

The bank recorded net income of $7.9 million on total equity of $107.6 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 0.91 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.