Safe and Sound

Montecito Bank & Trust

Santa Barbara, CA
5
Star Rating
Montecito Bank & Trust is an FDIC-insured bank started in 1975 and currently headquartered in Santa Barbara, CA. As of December 31, 2017, the bank had equity of $144.6 million on assets of $1.39 billion.

With 217 full-time employees in 11 offices in CA, the bank holds loans and leases worth $900.3 million, including real estate loans of $748.8 million. U.S. bank customers currently have $1.23 billion in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Montecito Bank & Trust exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a look at how the bank did on the three important criteria Bankrate used to grade U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

Capital works as a buffer against losses and as protection for depositors during times of economic instability for the bank. Therefore, when it comes to measuring an a bank's financial fortitude, capital is essential. When it comes to safety and soundness, more capital is better.

On our test to measure capital adequacy, Montecito Bank & Trust received a score of 10 out of a possible 30 points, lower than the national average of 13.13.

A bank's Tier 1 capital ratio is an essential measure of this buffer. Montecito Bank & Trust's Tier 1 capital ratio was 12.19 percent, exceeding the 6 percent level considered adequate by regulators, but below the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to economic downturns.

Overall, Montecito Bank & Trust held equity amounting to 10.37 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to determine the impact of problem assets, such as past-due loans, on the bank's capitalization and allocated loan loss reserves.

Having extensive holdings of these types of assets suggests a bank may eventually have to use capital to cover losses, cutting down on its equity buffer. 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, pushing down earnings and elevating the risk of a future failure.

Montecito Bank & Trust did better than the national average of 37.49 on Bankrate's test of asset quality, racking up 40 out of a possible 40 points .

The percentage of problem assets a bank holds compared to its total assets is a useful indicator of asset quality.As of December 31, 2017, 0.50 percent of Montecito Bank & Trust's loans were noncurrent -- in other words, 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 size of that reserve to the total amount of problematic loans can be a helpful indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Montecito Bank & Trust's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its safety and soundness. Earnings may be retained by the bank, increasing its capital cushion, or be used to deal with problematic loans, potentially making the bank better able to withstand economic shocks. Losses, on the other hand, lessen a bank's ability to do those things.

On Bankrate's earnings test, Montecito Bank & Trust scored 22 out of a possible 30, beating the national average of 15.12.

Return on equity, calculated by dividing net income (essentially, profit) by total equity, is one important way to measure a bank's earnings. Montecito Bank & Trust's most recent annualized quarterly return on equity was 12.46 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $17.5 million on total equity of $144.6 million. The bank reported an annualized return on average assets, or ROA, of 1.30 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.