Safe and Sound

Community Bank

Pasadena, CA
4
Star Rating
Community Bank is a Pasadena, CA-based, FDIC-insured bank founded in 1983. The bank has equity of $352.4 million on assets of $3.75 billion, according to December 31, 2017, regulatory filings.

U.S. bank customers have $2.86 billion on deposit at 17 offices in CA run by 426 full-time employees. With that footprint, the bank holds loans and leases worth $2.70 billion, including $2.11 billion worth of real estate loans.

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

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

Capital acts as a bulwark against losses and provides protection for depositors during periods of economic instability for the bank. Therefore, when it comes to measuring an a bank's financial resilience, capital is useful. From a safety and soundness perspective, the higher the capital, the better.

Community Bank fell short of the national average of 13.13 on our test to measure the adequacy of a bank's capital, receiving a score of 10 out of a possible 30 points.

A bank's Tier 1 capital ratio is a widely followed measure of this buffer. Community Bank's Tier 1 capital ratio was 10.91 percent, exceeding the 6 percent level regulators consider adequate, but under the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather economic challenges.

Overall, Community Bank held equity amounting to 9.40 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 mortgages, on the bank's loan loss reserves and overall capitalization.

Having extensive holdings of these types of assets could eventually force a bank to use capital to cover losses, reducing 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 test of asset quality, Community Bank scored 40 out of a possible 40 points, exceeding the national average of 37.49 points.

The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of December 31, 2017, 0.33 percent of Community 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 keep a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . Comparing the reserve's size to the total amount of at-risk loans can be a useful indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Community Bank's loan loss allowance in its most recent filings.

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 use them to address problematic loans, likely making the bank more resilient in tough times. Losses, on the other hand, lessen a bank's ability to do those things.

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

One important measure of a bank's earnings is return on equity, or net income (essentially profit) divided by the total amount of equity. The most recent annualized quarterly return on equity for Community Bank was 7.77 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $26.7 million on total equity of $352.4 million. The bank experienced an annualized return on average assets, or ROA, of 0.72 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.