Safe and Sound

California Bank of Commerce

Lafayette, CA
4
Star Rating
Lafayette, CA-based California Bank of Commerce is an FDIC-insured bank founded in 2007. The bank has equity of $95.0 million on $865.6 million in assets, according to December 31, 2017, regulatory filings.

With 103 full-time employees in 3 offices in CA, the bank currently holds loans and leases worth $723.5 million, including real estate loans of $392.4 million. U.S. bank customers currently have $760.6 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, California Bank of Commerce exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a breakdown of how the bank fared on the three key criteria Bankrate used to score U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital is an important measurement of a bank's financial fortitude. It works as a buffer against losses and as protection for depositors when a bank is struggling financially. When looking at safety and soundness, more capital is preferred.

California Bank of Commerce received a score of 12 out of a possible 30 points on our test to measure the adequacy of a bank's capital, coming in below the national average of 13.13.

A bank's Tier 1 capital ratio is a widely used measure of this buffer. California Bank of Commerce's Tier 1 capital ratio was 10.09 percent, above the 6 percent level regulators consider adequate, 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 economic headwinds.

Overall, California Bank of Commerce held equity amounting to 10.98 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to determine the impact of troubled assets, such as past-due loans, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

A bank with large numbers of these kinds of assets could eventually be required to use capital to absorb losses, reducing its equity buffer. Many of those assets are also likely to be in non-accrual status and no longer earning money, pushing down earnings and elevating the chances of a future failure.

On Bankrate's test of asset quality, California Bank of Commerce scored 40 out of a possible 40 points, beating out the national average of 37.49 points.

The percentage of problem assets a bank holds compared to its total assets is a useful indicator of asset quality.As of December 31, 2017, 0.07 percent of California Bank of Commerce'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 troubled assets known as an "allowance for loan and lease losses." How large that reserve is can be a helpful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problem loans. California Bank of Commerce's loan loss allowance was 1,921.49 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

A bank's profitability affects its long-term survivability. Earnings may be retained by the bank, increasing its capital buffer, or be used to deal with problematic loans, likely making the bank more resilient in times of trouble. However, banks that are losing money have less ability to do those things.

California Bank of Commerce fell short of the national average on Bankrate's earnings test, achieving a score of 14 out of a possible 30.

Return on equity, calculated by dividing net income (essentially, profit) by total equity, is one key measure of a bank's earnings. California Bank of Commerce's most recent annualized quarterly return on equity was 6.76 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $5.9 million on total equity of $95.0 million. The bank reported an annualized return on average assets, or ROA, of 0.73 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.