Safe and Sound

Bank of the Pacific

Aberdeen, WA
4
Star Rating
Founded in 1979, Bank of the Pacific is an FDIC-insured bank headquartered in Aberdeen, WA. Regulatory filings show the bank having equity of $97.5 million on assets of $894.0 million, as of December 31, 2017.

U.S. bank customers have $780.0 million on deposit at 18 offices in multiple states run by 245 full-time employees. With that footprint, the bank has amassed loans and leases worth $689.1 million, $492.6 million of which are for real estate.

Overall, Bankrate believes that, as of December 31, 2017, Bank of the Pacific exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for an analysis of how the bank fared on the three important criteria Bankrate used to score American banks.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial stability, capital is useful. It acts as a buffer against losses and as protection for depositors when a bank is experiencing financial trouble. From a safety and soundness perspective, the more capital, the better.

Bank of the Pacific received a score of 10 out of a possible 30 points on our test to measure capital adequacy, less than the national average of 13.13.

One essential measure of this buffer is a bank's Tier 1 capital ratio. Bank of the Pacific's Tier 1 capital ratio was 11.43 percent, above the 6 percent level considered adequate by regulators, but less than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to financial challenges.

Overall, Bank of the Pacific held equity amounting to 10.90 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to estimate the impact of problem assets, such as unpaid loans, on the bank's loan loss reserves and overall capitalization.

Having extensive holdings of these kinds of assets could eventually require a bank to use capital to cover losses, shrinking its buffer of equity. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, reducing earnings and elevating the risk of a failure in the future.

Bank of the Pacific scored 40 out of a possible 40 points on Bankrate's test of asset quality, above the national average of 37.49.

A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.31 percent of Bank of the Pacific'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 keep a reserve known as an "allowance for loan and lease losses" to deal with problem assets . Comparing the size of that reserve to the total amount of problematic 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 Pacific'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 address problematic loans, potentially making the bank more resilient in tough times. Conversely, losses reduce a bank's ability to do those things.

Bank of the Pacific scored 16 out of a possible 30 on Bankrate's earnings test, better than the national average of 15.12.

One widely used way to measure a bank's earnings is return on equity, calculated by dividing net income (profit, basically) by the total amount of equity. The most recent annualized quarterly return on equity for Bank of the Pacific was 7.99 percent, below the national average of 8.10 percent.

The bank recorded net income of $7.7 million on total equity of $97.5 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 0.86 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.