Safe and Sound

The Carlsbad National Bank

Carlsbad, NM
5
Star Rating
Carlsbad, NM-based The Carlsbad National Bank is an FDIC-insured bank founded in 1924. The bank has equity of $29.5 million on $385.8 million in assets, according to December 31, 2017, regulatory filings.

U.S. bank customers have $351.5 million on deposit at 3 offices in NM run by 69 full-time employees. With that footprint, the bank holds loans and leases worth $154.3 million, $116.7 million of which are for real estate.

Overall, Bankrate believes that, as of December 31, 2017, The Carlsbad National Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for an analysis of how the bank fared on the three major criteria Bankrate used to score U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial fortitude, capital is key. It works as a buffer against losses and provides protection for accountholders during periods of economic trouble for the bank. When it comes to safety and soundness, the higher the capital, the better.

On our test to measure capital adequacy, The Carlsbad National Bank received a score of 6 out of a possible 30 points, coming in below the national average of 13.13.

A bank's Tier 1 capital ratio is a widely used measure of this buffer. The Carlsbad National Bank's Tier 1 capital ratio was 18.10 percent, higher than the 6 percent level considered adequate by regulators, but under the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to financial difficulties.

Overall, The Carlsbad National Bank held equity amounting to 7.64 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

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

A bank with large numbers of these types of assets could eventually have to use capital to cover losses, reducing its cushion of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, decreasing earnings and increasing the chances of a future failure.

The Carlsbad National Bank scored 40 out of a possible 40 points on Bankrate's test of asset quality, exceeding the national average of 37.49.

The percentage of problem assets a bank holds compared to its total assets is a handy indicator of asset quality.As of December 31, 2017, 1.07 percent of The Carlsbad 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 maintain a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . That reserve's size can be a widely used indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on The Carlsbad 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 safety and soundness. A bank can retain its earnings, giving a boost to its capital buffer, or use them to deal with problematic loans, potentially making the bank better prepared to withstand financial trouble. Conversely, losses take away from a bank's ability to do those things.

The Carlsbad National Bank scored 28 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 (essentially, profit) by the total amount of equity, is one widely used measure of a bank's earnings. The Carlsbad National Bank's most recent annualized quarterly return on equity was 19.06 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $5.6 million on total equity of $29.5 million. The bank had an annualized return on average assets, or ROA, of 1.56 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.