Safe and Sound

Bank of the Sierra

Porterville, CA
5
Star Rating
Bank of the Sierra is an FDIC-insured bank started in 1978 and currently headquartered in Porterville, CA. Regulatory filings show the bank having equity of $247.5 million on $2,077,312,000 in assets, as of June 30, 2017.

Thanks to the efforts of 497 full-time employees in 34 offices in CA, the bank holds loans and leases worth $1.29 billion, $990.2 million of which are for real estate. The bank currently holds $1.79 billion in deposits from U.S. customers.

Overall, Bankrate believes that, as of June 30, 2017, Bank of the Sierra exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a look at how the bank faired on the three key criteria Bankrate used to grade American banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital is a key measurement of a bank's financial fortitude. It works as a buffer against losses and provides protection for depositors when a bank is experiencing economic trouble. When looking at safety and soundness, more capital is preferred.
Bank of the Sierra achieved a score of 14 out of a possible 30 points on our test to measure the adequacy of a bank's capital, beating out the national average of 13.38.

One widely followed measure of this buffer is a bank's Tier 1 capital ratio. Bank of the Sierra's Tier 1 capital ratio was 16.32 percent, higher than the 6 percent level considered adequate by regulators, but under the national average of 25.16 percent. The higher the capital ratio, the better the bank will be able to stand up to financial challenges.

Overall, Bank of the Sierra held equity amounting to 11.91 percent of its assets, which was lower than the national average of 12.10 percent.

Asset Quality Score

Bankrate uses this test to estimate the effect of problem assets, such as unpaid loans, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

Having a large number of these kinds of assets may eventually force a bank to use capital to cover losses, decreasing its equity cushion. It also means that there are likely to be many assets that are in non-accrual status and no longer earning interest for the bank, decreasing earnings and increasing the risk of a failure in the future.

Bank of the Sierra did better than the national average of 37.62 on Bankrate's test of asset quality, racking up 40 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 June 30, 2017, 0.43 percent of Bank of the Sierra'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 1.04 percent.

Banks maintain a reserve to deal with troubled assets known as an "allowance for loan and lease losses." Comparing the how large that reserve is to the total amount of at-risk loans can be a widely used indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Bank of the Sierra's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its safety and soundness. A bank can retain its earnings, expanding its capital buffer, or use them to deal with problematic loans, potentially making the bank better prepared to withstand economic trouble. However, banks that are losing money have less ability to do those things.

Bank of the Sierra scored 18 out of a possible 30 on Bankrate's test of earnings, better than the national average of 16.52.

One widely used measure of a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by the total amount of equity. The most recent annualized quarterly return on equity for Bank of the Sierra was 8.40 percent, below the national average of 9.28 percent.

The bank earned net income of $10.1 million on total equity of $247.5 million for the twelve months ended June 30, 2017. The bank experienced an annualized return on average assets, or ROA, of 1.00 percent, right at the level deemed satisfactory in accordance with industry standards, but below the average for U.S. banks of 1.14 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.