SAFE & SOUND® STAR RATINGS™

Memorandum on findings

CONTRA COSTA
PO Box 509
Martinez, CA 94553

STAR RATING: 3 starstarstar
Predictive Indicator + (improve)
As of June 30, 2014
Credit Union ID 6333
INTRODUCTION

A credit union is a nonprofit, cooperative financial institution, owned and administered by individual members, who must meet eligibility requirements to join. Credit unions pay no federal income tax. Community development credit unions are chartered to serve the needs of low income members who reside in financially distressed or under-served communities.

The Bankrate proprietary credit union rating model analyzes capitalization, asset quality, earnings, and liquidity to produce composite and component "Star" ratings that can be used as a measure of the rated entity's financial safety and soundness. Additionally, early warning components of the model highlight operating characteristics of immediate concern and recommended follow-up actions. The analyses are not adjusted for TARP funding and those institutions receiving funds may receive ratings that would differ were the TARP funds adjusted out of the analyses. You can check whether or not this institution has received TARP funding and whether or not they have paid it back at http://projects.propublica.org/bailout/list/index.

INSTITUTIONAL HIGHLIGHTS
Institution Name CONTRA COSTA
Report Date June 30, 2014
Report Period 6 months
Star Composite Rating, Percentile Rank 3 /32.76
Predictive Indicator + (improve)
Earnings Rating, Percentile Rank 1 /26.05
Asset Quality Rating, Percentile Rank 5 /75.66
Capital Rating, Percentile Rank 2 /38.86
Liquidity Rating, Percentile Rank 2 /35.93
Institution Asset Size 629.6016 million
Deposits 562.6074 million
Loans 167.7035 million
Equity 64.5121 million
Net Profit/Loss 495.2450 thousand

COMPONENT HIGHLIGHTS

Component star rating: 2 starstar
Capital highlights

Capitalization stands as protection against loss for credit union members, creditors and, if applicable, the insurer. Regulators place a high degree of importance upon assessments of capitalization.

Key measures of Capital AdequacyRatio (%)Assessment
Net Capital / Assets 10.25Above Peer Norm
Capital (1) / Assets 10.62Approximates Peer Norm
(1) Includes loan loss allowance.

Component star rating: 5 starstarstarstarstar
Asset quality highlights

Asset quality is a major determinant of the viability of any banking institution. Poor asset quality will have a very direct impact upon other components and regulators invest substantial amounts of time and resources in gauging the quality of loans and investments.

Key Asset Quality information and ratios:Ratio (%)Assessment
Nonperforming Asset Ratio (2)0.44Relatively Low
Loss Reserve Coverage (3)807.01Much Better Than Normal
Asset Growth Rate 3.32Normal
(2) Nonperforming Assets/Equity plus Loss Reserves

(3) Loan Loss reserves/Delinquent Loans


Component star rating: 1 star
Earnings highlights

A credit union's profitability is critical to building capital and establishing adequate loss reserves.

Key Earnings information and ratios:Ratio (%)Assessment
Return on Average Assets 0.21Substantially Below Average
Overhead / Average Assets 1.43Much Better Than Average
Note: The earnings assessment is based on the latest four quarters of income and expense.


Component star rating: 2 starstar
Liquidity highlights

Liquidity provides funding for normal operations and represents a reserve for unanticipated disintermediation.

Key measures of Liquidity:Ratio (%)Assessment
Balance Sheet Liquidity4.64below average

Early warning highlights

Early warning indicators identify areas of potential concern, which may lead to financial deterioration and thus, require inquiry or in depth investigation.
For this institution we have noted:

  • No operating characteristics requiring specific follow-up

Institution Commentary

OVERVIEW of Institution
CONTRA COSTA is a federally chartered credit union, which, as of June 30, 2014, reported total assets of approximately $629.6016 million. At that date, loans and deposits held by the institution amounted to $167.7035 million and $562.6074 million, respectively. Equity, the difference between a credit union's total assets and total liabilities, was determined to have been $64.5121 million, which was 10.25% of total assets.

COMPOSITE SUMMARY
Bankrate believes that, as of June 30, 2014, this credit union exhibited a generally satisfactory condition, characterized by below standard capitalization, a very high measure of asset quality, substantially lower than normal profitability, and lower than normal liquidity.

CAPITAL ANALYSIS
Balance sheet structural changes, through the one year period of time ended June 30, 2014, have had little or no positive, and quite possibly a negative, impact upon the institution's capital position. Our analytical methodology does take into account the quantity, quality, durability, and direction of net worth, and, as set forth above, we have determined, based upon our series of tests, that this credit union demonstrates below standard capitalization.

ASSET QUALITY ANALYSIS
The institution reveals, as previously stated, a very high measure of asset quality. That conclusion incorporates our analysis of data depicting regional economic conditions as well as our computations of a relatively low June 30, 2014 nonperforming asset ratio and much better than normal reserve coverage for nonperforming loans.

Credit card lending activities should not, based on our analysis of asset quality trends and conditions, have a substantial negative impact upon future results.

EARNINGS ANALYSIS
For the year ended June 30, 2014, this institution recorded a net profit of $1,290.32 thousand, which represented a return on average assets (ROA) of 0.21%. Year earlier four quarter results amounted to a net profit of $1,819,739, or a 0.30% ROA. ROA is the key measurement of profitability within the credit union industry, and the industry's ROA, for the six months ended June 30, 2014, approximated 0.81%.


We have concluded that, for the four quarters ending June 30 2014, the institution achieved a substantially below average return on average assets. Strict expense control defined by a much better than average overhead ratio is in evidence.

LIQUIDITY ANALYSIS
As of June 30, 2014, the institution displayed below average balance sheet liquidity.

Accounting principles require some securities to be categorized as "Available-for-Sale." Changes in market value of these securities are reflected through the GAAP (Generally Accepted Accounting Principles) net worth of the institution. Based upon the credit union's present balance sheet, changes in the value of the current level of securities reported as might not have a substantial impact upon future net worth of the credit union.

INSTITUTION SUMMARY
This credit union has been rated generally satisfactory.
Negative factors that impacted that rating follow:

  • Capitalization
  • Earnings
  • Liquidity
Positive factors that impacted that rating follow:
  • Asset Quality

As stated, we have determined a Composite Star rating for this credit union of 3 starstarstar , indicative of a generally satisfactory financial condition. At times, conditions of financial institutions change rapidly and significantly. Hence, our Safe & Sound Star ratings should not be deemed predictive of likely future ratings. However, in view of early warning indicators set forth within this report, in combination with the institution's financial data, we believe that the Star rating for this institution is likely to improve within the ensuing twelve month period.

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