Safe and Sound

Redding Bank of Commerce

Redding, CA
4
Star Rating
Redding, CA-based Redding Bank of Commerce is an FDIC-insured bank founded in 1982. As of June 30, 2017, the bank held equity of $127.3 million on $1,213,021,000 in assets.

With 188 full-time employees in 10 offices in CA, the bank holds loans and leases worth $805.2 million, including real estate loans of $612.4 million. U.S. bank customers currently have $1.07 billion in deposits with the bank.

Overall, Bankrate believes that, as of June 30, 2017, Redding Bank of Commerce exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a look at how the bank faired on the three important criteria Bankrate used to evaluate American banks.

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SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital is a key measurement of an institution's financial strength. It acts 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 higher the capital, the better.
Redding Bank of Commerce received a score of 12 out of a possible 30 points on our test to measure capital adequacy, falling short of the national average of 13.38.

One essential measure of this buffer is a bank's Tier 1 capital ratio. Redding Bank of Commerce's Tier 1 capital ratio was 12.66 percent, exceeding the 6 percent level considered adequate by regulators, but lower than the national average of 25.16 percent. A higher capital ratio suggests the bank will be better able to stand up to economic difficulties.

Overall, Redding Bank of Commerce held equity amounting to 10.50 percent of its assets, which was lower than the national average of 12.10 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 past-due mortgages.

Having large numbers of these types of assets may eventually require a bank to use capital to cover losses, shrinking its equity buffer. 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, resulting in lower earnings and potentially more risk of a future failure.

Redding Bank of Commerce scored 36 out of a possible 40 points on Bankrate's test of asset quality, falling short of the national average of 37.62.

A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of June 30, 2017, 1.12 percent of Redding Bank of Commerce'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 1.04 percent.

Banks maintain a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . Comparing the that reserve's size to the total amount of problematic loans can be a useful indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Redding Bank of Commerce's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its safety and soundness. Earnings may be retained by the bank, increasing its capital buffer, or be used to address problematic loans, likely making the bank more resilient in tough times. Obviously, banks that are losing money have less ability to do those things.

Redding Bank of Commerce beat the national average on Bankrate's test of earnings, achieving a score of 18 out of a possible 30.

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. Redding Bank of Commerce's most recent annualized quarterly return on equity was 8.95 percent, below the national average of 9.28 percent.

For the twelve months ended June 30, 2017, the bank reported net income of $5.6 million on total equity of $127.3 million. The bank experienced an annualized return on average assets, or ROA, of 0.96 percent, below the 1 percent deemed satisfactory in accordance with industry standards and 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.