Safe and Sound

Monterey County Bank

Monterey, CA
1
Star Rating
Monterey County Bank is a Monterey, CA-based, FDIC-insured bank founded in 1977. As of December 31, 2017, the bank had equity of $16.2 million on $175.7 million in assets.

U.S. bank customers have $146.4 million on deposit at 4 offices in CA run by 45 full-time employees. With that footprint, the bank holds loans and leases worth $91.4 million, including $62.7 million worth of real estate loans.

Overall, Bankrate believes that, as of December 31, 2017, Monterey County Bank exhibited a significantly below-average condition, earning 1 out of 5 stars for safety and soundness. Keep reading for an analysis of how the bank did on the three important criteria Bankrate used to evaluate American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts 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 an institution's financial fortitude. When looking at safety and soundness, more capital is better.

Monterey County Bank fell below the national average of 13.13 on our test to measure the adequacy of a bank's capital, achieving a score of 10 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Monterey County Bank's Tier 1 capital ratio was 12.38 percent, higher than the 6 percent level regulators consider adequate, but below the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather economic challenges.

Overall, Monterey County Bank held equity amounting to 9.20 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

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

Having large numbers of these types of assets may eventually force a bank to use capital to absorb losses, diminishing its cushion of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning interest for the bank, resulting in reduced earnings and potentially more risk of a future failure.

Monterey County Bank came in below the national average of 37.49 on Bankrate's test of asset quality, racking up 0 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 December 31, 2017, 0.15 percent of Monterey County Bank'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 maintain a reserve known as an "allowance for loan and lease losses" to deal with problem assets . Comparing the reserve's size to the total amount of problem loans can be a widely used indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Monterey County Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its safety and soundness. Earnings may be retained by the bank, expanding its capital cushion, or be used to address problematic loans, potentially making the bank better able to withstand economic trouble. Conversely, losses lessen a bank's ability to do those things.

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

Return on equity, calculated by dividing net income (profit, basically) by the total amount of equity, is one widely used measure of a bank's earnings. The most recent annualized quarterly return on equity for Monterey County Bank was 10.03 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $1.6 million on total equity of $16.2 million. The bank experienced an annualized return on average assets, or ROA, of 0.85 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.