Safe and Sound

Lighthouse Bank

Santa Cruz, CA
5
Star Rating
Started in 2007, Lighthouse Bank is an FDIC-insured bank headquartered in Santa Cruz, CA. Regulatory filings show the bank having equity of $34.4 million on $261.1 million in assets, as of December 31, 2017.

Thanks to the work of 32 full-time employees in 2 offices in CA, the bank has amassed loans and leases worth $207.7 million, including real estate loans of $192.0 million. The bank currently holds $226.1 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, Lighthouse Bank exhibited a superior condition, earning a full 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 American banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital is a key measurement of a bank's financial strength. It acts as a buffer against losses and provides protection for depositors during periods of economic trouble for the bank. From a safety and soundness perspective, the higher the capital, the better.

Lighthouse Bank did better than the national average of 13.13 points on our test to measure the adequacy of a bank's capital, receiving a score of 18 out of a possible 30 points.

A bank's Tier 1 capital ratio is a widely used measure of this buffer. Lighthouse Bank's Tier 1 capital ratio was 13.44 percent, exceeding the 6 percent level considered adequate by regulators, but lower than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather financial headwinds.

Overall, Lighthouse Bank held equity amounting to 13.17 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to determine the effect of troubled assets, such as unpaid mortgages, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

A bank with extensive holdings of these kinds of assets may eventually be required to use capital to absorb losses, cutting down on its equity cushion. Many of those assets are also likely to be in non-accrual status and thus aren't earning interest for the bank, resulting in lower earnings and potentially more risk of a failure in the future.

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

A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, none of Lighthouse 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 to deal with troubled assets known as an "allowance for loan and lease losses." Comparing the reserve's size 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 Lighthouse Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money affects its long-term survivability. Earnings can be retained by the bank, giving a boost to its capital cushion, or be used to address problematic loans, potentially making the bank more resilient in tough times. Conversely, losses take away from a bank's ability to do those things.

Lighthouse Bank scored 18 out of a possible 30 on Bankrate's earnings test, beating out the national average of 15.12.

One important way to measure a bank's earnings is return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity. The most recent annualized quarterly return on equity for Lighthouse Bank was 9.20 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $3.0 million on total equity of $34.4 million. The bank had an annualized return on average assets, or ROA, of 1.24 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above 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.