Safe and Sound

CHARLES SCHWAB SIGNATURE BANK

Scottsdale, AZ
4
Star Rating
Henderson, NV-based CHARLES SCHWAB SIGNATURE BANK is an FDIC-insured bank founded in 1991. Regulatory filings show the bank having equity of $6.9 million on assets of $8.4 million, as of December 31, 2017.

With 3 full-time employees, the bank holds loans and leases worth $0, including real estate loans of $0. U.S. bank customers currently have $1.1 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, CHARLES SCHWAB SIGNATURE BANK exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a look at how the bank fared on the three key criteria Bankrate used to score American banks.

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SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital is a key measurement of an institution's financial resilience. It acts as a cushion against losses and provides protection for accountholders when a bank is experiencing economic instability. When looking at safety and soundness, the more capital, the better.

CHARLES SCHWAB SIGNATURE BANK racked up 30 out of a possible 30 points on our test to measure the adequacy of a bank's capital, beating out the national average of 13.13.

A bank's Tier 1 capital ratio is a widely used measure of this buffer. CHARLES SCHWAB SIGNATURE BANK's Tier 1 capital ratio was 1,725.50 percent, higher than the 6 percent level considered adequate by regulators, and higher than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather economic headwinds.

Overall, CHARLES SCHWAB SIGNATURE BANK held equity amounting to 82.25 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 reserves set aside to cover loan losses, as well as overall capitalization, could be affected by troubled assets, such as unpaid mortgages.

Having a large number of these types of assets could eventually require a bank to use capital to cover losses, diminishing its equity buffer. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, resulting in lower earnings and potentially more risk of a future failure.

On Bankrate's asset quality test, CHARLES SCHWAB SIGNATURE BANK scored 40 out of a possible 40 points, above the national average of 37.49 points.

The percentage of problem assets a bank holds compared to its total assets is a widely used indicator of asset quality.

Banks maintain a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . That reserve's size can be a handy indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on CHARLES SCHWAB SIGNATURE BANK's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its long-term survivability. Earnings can be retained by the bank, expanding its capital cushion, or be used to address problematic loans, potentially making the bank more resilient in tough times. However, banks that are losing money have less ability to do those things.

On Bankrate's test of earnings, CHARLES SCHWAB SIGNATURE BANK scored 0 out of a possible 30, lower than the national average of 15.12.

One important measure of a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by total equity. CHARLES SCHWAB SIGNATURE BANK's most recent annualized quarterly return on equity was -0.57 percent, below the national average of 8.10 percent.

The bank recorded net income of $-225,000 on total equity of $6.9 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of -0.11 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.