Safe and Sound

Mega Bank

San Gabriel, CA
4
Star Rating
Mega Bank is an FDIC-insured bank started in 2008 and currently based in San Gabriel, CA. The bank holds equity of $41.8 million on $352.3 million in assets, according to December 31, 2017, regulatory filings.

U.S. bank customers have $278.8 million on deposit at 5 offices in CA run by 47 full-time employees. With that footprint, the bank has amassed loans and leases worth $265.8 million, $247.1 million of which are for real estate.

Overall, Bankrate believes that, as of December 31, 2017, Mega 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 major criteria Bankrate used to evaluate American banks.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a cushion against losses and provides protection for account holders when a bank is struggling financially. Therefore, a bank's level of capital is an essential measurement of a bank's financial fortitude. From a safety and soundness perspective, the more capital, the better.

Mega Bank racked up 14 out of a possible 30 points on our test to measure the adequacy of a bank's capital, above the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Mega Bank's Tier 1 capital ratio was 16.36 percent, exceeding the 6 percent level regulators consider adequate, but lower than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to financial challenges.

Overall, Mega Bank held equity amounting to 11.86 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to estimate how the bank's loan loss reserves and overall capitalization could be affected by problem assets, such as past-due mortgages.

Having extensive holdings of these types of assets suggests a bank could have to use capital to absorb losses, decreasing 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 diminished earnings and potentially more risk of a failure in the future.

Mega Bank scored 40 out of a possible 40 points on Bankrate's asset quality test, above the national average of 37.49.

A helpful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.63 percent of Mega 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 problem assets . How large that reserve is can be a useful 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 Mega Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its safety and soundness. Earnings can be retained by the bank, boosting its capital buffer, or be used to address problematic loans, likely making the bank more resilient in times of trouble. However, banks that are losing money are less able to do those things.

Mega Bank did below-average on Bankrate's test of earnings, achieving a score of 8 out of a possible 30.

Return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity, is one important way to measure a bank's earnings. Mega Bank's most recent annualized quarterly return on equity was 3.78 percent, below the national average of 8.10 percent.

The bank recorded net income of $1.5 million on total equity of $41.8 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 0.46 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.