Safe and Sound

Capital Bank

San Juan Capistr, CA
5
Star Rating
Capital Bank is a San Juan Capistr, CA-based, FDIC-insured bank started in 2008. As of June 30, 2017, the bank had equity of $29.2 million on $305,356,000 in assets.

Thanks to the efforts of 36 full-time employees in 2 offices in CA, the bank holds loans and leases worth $249.4 million, $207.7 million of which are for real estate. The bank currently holds $259.8 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of June 30, 2017, Capital Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's an analysis of how the bank did on the three important criteria Bankrate used to grade U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a buffer against losses and provides protection for depositors when a bank is experiencing financial instability. Therefore, when it comes to measuring an a bank's financial strength, capital is essential. When looking at safety and soundness, the more capital, the better.
On our test to measure the adequacy of a bank's capital, Capital Bank received a score of 10 out of a possible 30 points, below the national average of 13.38.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Capital Bank's Tier 1 capital ratio was 10.63 percent, above 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 financial challenges.

Overall, Capital Bank held equity amounting to 9.58 percent of its assets, which was lower than the national average of 12.10 percent.

Asset Quality Score

This test is intended to try to understand how the bank's reserves set aside to cover loan losses, as well as overall capitalization could be affected by problem assets, such as past-due loans.

A bank with a large number of these kinds of assets may eventually be required to use capital to absorb losses, cutting down on its cushion of equity. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning money, resulting in reduced earnings and potentially more risk of a failure in the future.

Capital Bank scored 40 out of a possible 40 points on Bankrate's asset quality test, exceeding the national average of 37.62.

The percentage of problem assets a bank holds compared to its total assets is a handy indicator of asset quality.As of June 30, 2017, 0.05 percent of Capital Bank's loans were noncurrent -- in other words, they were more than 90 days past due or were in non-accrual status. That's below the national average of 1.04 percent.

Banks keep a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . That reserve's size can be a widely used indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problem loans. Capital Bank's loan loss allowance was 2,455.97 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 affects its safety and soundness. A bank can retain its earnings, boosting its capital cushion, or use them to deal with problematic loans, potentially making the bank better prepared to withstand financial trouble. However, banks that are losing money are less able to do those things.

Capital Bank exceeded the national average on Bankrate's test of earnings, achieving a score of 22 out of a possible 30.

Return on equity, calculated by dividing net income (essentially, profit) by the total amount of equity, is one important way to measure a bank's earnings. Capital Bank's most recent annualized quarterly return on equity was 13.42 percent, above the national average of 9.28 percent.

For the twelve months ended June 30, 2017, the bank earned net income of $1.9 million on total equity of $29.2 million. The bank reported an annualized return on average assets, or ROA, of 1.23 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above 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.