Safe and Sound

Choice Financial Group

Fargo, ND
5
Star Rating
Choice Financial Group is an FDIC-insured bank founded in 1906 and currently based in Fargo, ND. Regulatory filings show the bank having equity of $132.6 million on assets of $1.16 billion, as of June 30, 2017.

Thanks to the efforts of 230 full-time employees in 19 offices in multiple states, the bank holds loans and leases worth $1.04 billion, including real estate loans of $583.5 million. U.S. bank customers currently have $1.02 billion in deposits with the bank.

Overall, Bankrate believes that, as of June 30, 2017, Choice Financial Group exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a look at how the bank faired on the three key 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 important. It works as a cushion against losses and provides protection for accountholders during times of economic trouble for the bank. From a safety and soundness perspective, more capital is better.
Choice Financial Group fell short of the national average of 13.38 on our test to measure the adequacy of a bank's capital, scoring 12 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Choice Financial Group's Tier 1 capital ratio was 11.89 percent, higher than the 6 percent level regulators consider adequate, but lower than the national average of 25.16 percent. The higher the capital ratio, the better the bank will be able to stand up to financial difficulties.

Overall, Choice Financial Group held equity amounting to 11.40 percent of its assets, which was lower than the national average of 12.10 percent.

Asset Quality Score

In this test, Bankrate tries to determine the effect of problem assets, such as unpaid mortgages, on the bank's loan loss reserves and overall capitalization.

A bank with lots of these types of assets may eventually be required to use capital to cover losses, shrinking its cushion of equity. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, resulting in lower earnings and potentially more risk of a future failure.

On Bankrate's test of asset quality, Choice Financial Group scored 40 out of a possible 40 points, better than the national average of 37.62 points.

The percentage of problem assets a bank holds compared to its total assets is a handy indicator of asset quality.As of June 30, 2017, 0.69 percent of Choice Financial Group'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 1.04 percent.

Banks maintain a reserve to handle troubled assets known as an "allowance for loan and lease losses." That reserve's size can be a helpful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on Choice Financial Group'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, giving a boost to its capital buffer, or be used to address problematic loans, likely making the bank more resilient in times of trouble. Conversely, losses lessen a bank's ability to do those things.

On Bankrate's test of earnings, Choice Financial Group scored 30 out of a possible 30, better than the national average of 16.52.

Return on equity, calculated by dividing net income (profit, essentially) by total equity, is one widely used measure of a bank's earnings. The most recent annualized quarterly return on equity for Choice Financial Group was 21.84 percent, above the national average of 9.28 percent.

For the twelve months ended June 30, 2017, the bank earned net income of $14.0 million on total equity of $132.6 million. The bank experienced an annualized return on average assets, or ROA, of 2.41 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above the average for U.S. banks of 1.14 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.