Safe and Sound

Lighthouse Bank

Santa Cruz, CA
5
Star Rating
Lighthouse Bank is an FDIC-insured bank founded in 2007 and currently headquartered in Santa Cruz, CA. As of June 30, 2017, the bank held equity of $32.6 million on $243,783,000 in assets.

With 28 full-time employees, the bank holds loans and leases worth $180.8 million, including real estate loans of $175.0 million. U.S. bank customers currently have $210.5 million in deposits with the bank.

Overall, Bankrate believes that, as of June 30, 2017, Lighthouse Bank 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 U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial strength, capital is crucial. It works as a bulwark against losses and as protection for accountholders when a bank is struggling financially. From a safety and soundness perspective, more capital is better.
Lighthouse Bank racked up 18 out of a possible 30 points on our test to measure capital adequacy, beating the national average of 13.38.

One commonly used measure of this buffer is a bank's Tier 1 capital ratio. Lighthouse Bank's Tier 1 capital ratio was 14.52 percent, exceeding the 6 percent level considered adequate by regulators, but below the national average of 25.16 percent. A higher capital ratio suggests the bank will be better able to stand up to economic challenges.

Overall, Lighthouse Bank held equity amounting to 13.38 percent of its assets, which exceeded the national average of 12.10 percent.

Asset Quality Score

This test is intended to estimate how the bank's loan loss reserves and overall capitalization could be affected by problem assets, such as past-due mortgages.

Having extensive holdings of these kinds of assets could eventually force a bank to use capital to cover losses, reducing 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 elevating the risk of a failure in the future.

Lighthouse Bank scored above the national average of 37.62 on Bankrate's asset quality test, racking up 40 out of a possible 40 points .

A helpful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of June 30, 2017, none of Lighthouse Bank'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 keep a reserve to handle problem assets known as an "allowance for loan and lease losses." Comparing the the size of that reserve to the total amount of problematic loans can be a handy indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Lighthouse Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its long-term survivability. A bank can retain its earnings, increasing its capital cushion, or use them to deal with problematic loans, potentially making the bank better prepared to withstand economic trouble. Obviously, banks that are losing money have less ability to do those things.

On Bankrate's test of earnings, Lighthouse Bank scored 18 out of a possible 30, beating the national average of 16.52.

One key way to measure a bank's earnings is return on equity, or net income (profit, basically) divided by the total amount of equity. Lighthouse Bank's most recent annualized quarterly return on equity was 9.43 percent, above the national average of 9.28 percent.

The bank recorded net income of $1.5 million on total equity of $32.6 million for the twelve months ended June 30, 2017. The bank reported an annualized return on average assets, or ROA, of 1.29 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above 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.