Safe and Sound

American Continental Bank

City Of Industry, CA
5
Star Rating
City Of Industry, CA-based American Continental Bank is an FDIC-insured bank founded in 2003. Regulatory filings show the bank having equity of $29.8 million on assets of $208.3 million, as of December 31, 2017.

Thanks to the efforts of 29 full-time employees in 4 offices in CA, the bank has amassed loans and leases worth $148.8 million, $146.3 million of which are for real estate. U.S. bank customers currently have $177.8 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, American Continental Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a breakdown of how the bank did on the three major criteria Bankrate used to score American banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a buffer against losses and provides protection for depositors when a bank is experiencing economic instability. Therefore, when it comes to measuring an an institution's financial resilience, capital is crucial. When looking at safety and soundness, the more capital, the better.

American Continental Bank did better than the national average of 13.13 points on our test to measure the adequacy of a bank's capital, scoring 20 out of a possible 30 points.

A bank's Tier 1 capital ratio is an important measure of this buffer. American Continental Bank's Tier 1 capital ratio was 18.41 percent, above the 6 percent level considered adequate by regulators, but less than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to economic downturns.

Overall, American Continental Bank held equity amounting to 14.29 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test is intended to try to understand how the bank's loan loss reserves and overall capitalization could be affected by troubled assets, such as unpaid mortgages.

Having lots of these types of assets may eventually force a bank to use capital to absorb losses, shrinking its buffer of equity. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, resulting in diminished earnings and potentially more risk of a future failure.

On Bankrate's test of asset quality, American Continental Bank scored 40 out of a possible 40 points, better than the national average of 37.49 points.

The percentage of problem assets a bank holds compared to its total assets is a handy indicator of asset quality.As of December 31, 2017, 0.10 percent of American Continental 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 1.01 percent.

Banks maintain a reserve to deal with problem assets known as an "allowance for loan and lease losses." That reserve's size can be a useful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problematic loans. American Continental Bank's loan loss allowance was 1,903.47 percent of its total noncurrent loans, above the national average. All else being equal, the higher the ratio of loan loss allowance to noncurrent loans, the better.

Earnings score

How profitable a bank is has an effect on its safety and soundness. A bank can retain its earnings, increasing its capital buffer, or put them to work addressing problematic loans, likely making the bank more resilient in times of trouble. Conversely, losses take away from a bank's ability to do those things.

American Continental Bank received below-average marks on Bankrate's test of earnings, achieving a score of 14 out of a possible 30.

Return on equity, calculated by dividing net income (profit, essentially) by total equity, is one key measure of a bank's earnings. The most recent annualized quarterly return on equity for American Continental Bank was 6.50 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $1.9 million on total equity of $29.8 million. The bank reported an annualized return on average assets, or ROA, of 0.89 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.