Safe and Sound

Neighborhood National Bank

5
Star Rating
Started in 1997, Neighborhood National Bank is an FDIC-insured bank based in San Diego, CA. As of December 31, 2017, the bank had equity of $10.0 million on $58.3 million in assets.

With 34 full-time employees in 3 offices in CA, the bank currently holds loans and leases worth $37.0 million, including real estate loans of $32.1 million. U.S. bank customers currently have $45.5 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Neighborhood National Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a look at how the bank did on the three key criteria Bankrate used to evaluate U.S. banks on safety and soundness.

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SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital is an important measurement of a bank's financial strength. It acts as a cushion against losses and affords protection for depositors when a bank is struggling financially. From a safety and soundness perspective, the higher the capital, the better.

Neighborhood National Bank scored above the national average of 13.13 points on our test to measure capital adequacy, scoring 26 out of a possible 30 points.

A bank's Tier 1 capital ratio is an important measure of this buffer. Neighborhood National Bank's Tier 1 capital ratio was 25.27 percent, above 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 financial downturns.

Overall, Neighborhood National Bank held equity amounting to 17.17 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

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

Having a large number of these types of assets means a bank may eventually have to use capital to absorb losses, decreasing its equity buffer. Many of those assets are also likely to be in non-accrual status and no longer earning money, diminishing earnings and increasing the risk of a future failure.

On Bankrate's test of asset quality, Neighborhood National Bank scored 40 out of a possible 40 points, better than the national average of 37.49 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, 1.21 percent of Neighborhood National Bank's loans were noncurrent -- in other words, they were more than 90 days past due or were in non-accrual status. That's above 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 . The size of that reserve can be a handy indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on Neighborhood National Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money has an effect on its long-term survivability. A bank can retain its earnings, expanding its capital buffer, or use them to address problematic loans, likely making the bank better able to withstand financial trouble. Banks that are losing money, however, have less ability to do those things.

On Bankrate's test of earnings, Neighborhood National Bank scored 4 out of a possible 30, failing to reach 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. Neighborhood National Bank's most recent annualized quarterly return on equity was 1.72 percent, below the national average of 8.10 percent.

The bank earned net income of $148,000 on total equity of $10.0 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 0.25 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.