Safe and Sound

Folsom Lake Bank

Folsom, CA
3
Star Rating
Folsom, CA-based Folsom Lake Bank is an FDIC-insured bank started in 2007. Regulatory filings show the bank having equity of $17.6 million on assets of $205.9 million, as of June 30, 2017.

Thanks to the efforts of 25 full-time employees in 4 offices in CA, the bank currently holds loans and leases worth $125.7 million, $113.2 million of which are for real estate. The bank currently holds $171.4 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of June 30, 2017, Folsom Lake Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's an analysis of how the bank faired on the three key criteria Bankrate used to grade American banks.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial stability, capital is useful. It acts as a cushion against losses and affords protection for depositors during times of financial instability for the bank. From a safety and soundness perspective, the more capital, the better.
Folsom Lake Bank received a score of 8 out of a possible 30 points on our test to measure capital adequacy, lower than the national average of 13.38.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Folsom Lake Bank's Tier 1 capital ratio was 12.16 percent, higher than the 6 percent level considered adequate by regulators, but under the national average of 25.16 percent. A higher capital ratio means the bank will be better able to weather financial difficulties.

Overall, Folsom Lake Bank held equity amounting to 8.57 percent of its assets, which was lower than the national average of 12.10 percent.

Asset Quality Score

Bankrate uses this test to determine the effect of troubled assets, such as unpaid mortgages, on the bank's capitalization and allocated loan loss reserves.

Having extensive holdings of these kinds of assets could eventually force a bank to use capital to absorb losses, diminishing its equity cushion. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning money, diminishing earnings and elevating the risk of a failure in the future.

Folsom Lake Bank did better than the national average of 37.62 on Bankrate's asset quality test, racking up 40 out of a possible 40 points .

A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of June 30, 2017, none of Folsom Lake 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 1.04 percent.

Banks maintain a reserve to deal with problem assets known as an "allowance for loan and lease losses." Comparing the how large that reserve is to the total amount of problematic loans can be a handy indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Folsom Lake Bank'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, boosting its capital buffer, or use them to deal with problematic loans, potentially making the bank better prepared to withstand financial trouble. Conversely, losses reduce a bank's ability to do those things.

Folsom Lake Bank scored 8 out of a possible 30 on Bankrate's earnings test, coming in below the national average of 16.52.

One widely used measure of a bank's earnings is return on equity, or net income (profit, basically) divided by the total amount of equity. Folsom Lake Bank's most recent annualized quarterly return on equity was 3.82 percent, below the national average of 9.28 percent.

The bank recorded net income of $330,000 on total equity of $17.6 million for the twelve months ended June 30, 2017. The bank reported an annualized return on average assets, or ROA, of 0.33 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below 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.