Safe and Sound

Merchants Bank of California, National Association

NR
Star Rating
Carson, CA-based Merchants Bank of California, National Association is an FDIC-insured bank founded in 1989. The bank has equity of $985,000 on $4.9 million in assets, according to December 31, 2017, regulatory filings.

U.S. customers have $0 on deposit at the bank, which has amassed loans and leases worth $0, including real estate loans of $0.

Overall, Bankrate did not have enough information on this institution to give it a star rating. Keep reading for an analysis of how the bank fared on the three key criteria Bankrate used to score American banks.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial strength, capital is useful. It acts as a cushion against losses and affords protection for accountholders when a bank is experiencing financial trouble. From a safety and soundness perspective, more capital is better.

Merchants Bank of California, National Association beat out the national average of 13.13 points on our test to measure capital adequacy, racking up 30 out of a possible 30 points.

A bank's Tier 1 capital ratio is a commonly used measure of this buffer. Merchants Bank of California, National Association's Tier 1 capital ratio was 108.39 percent, above the 6 percent level regulators consider adequate, and above the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather financial challenges.

Overall, Merchants Bank of California, National Association held equity amounting to 20.14 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to estimate the effect of troubled assets, such as past-due loans, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

Having extensive holdings of these kinds of assets may eventually force a bank to use capital to absorb losses, reducing 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 interest for the bank, resulting in lower earnings and potentially more risk of a failure in the future.

Merchants Bank of California, National Association scored above the national average of 37.49 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.

Banks maintain a reserve to deal with problem assets known as an "allowance for loan and lease losses." How large that reserve is can be a helpful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on Merchants Bank of California, National Association'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, giving a boost to its capital buffer, or put them to work addressing problematic loans, likely making the bank better able to withstand economic trouble. Conversely, losses reduce a bank's ability to do those things.

Merchants Bank of California, National Association scored 0 out of a possible 30 on Bankrate's test of earnings, lower than 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 total equity. Merchants Bank of California, National Association's most recent annualized quarterly return on equity was -176.12 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $-7.8 million on total equity of $985,000. The bank had an annualized return on average assets, or ROA, of -24.07 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.