Safe and Sound

First Priority Bank

Malvern, PA
4
Star Rating
Founded in 2005, First Priority Bank is an FDIC-insured bank based in Malvern, PA. The bank has equity of $49.3 million on assets of $607.0 million, according to June 30, 2017, regulatory filings.

With 71 full-time employees in 7 offices in PA, the bank has amassed loans and leases worth $491.4 million, including real estate loans of $419.8 million. U.S. bank customers currently have $463.6 million in deposits with the bank.

Overall, Bankrate believes that, as of June 30, 2017, First Priority Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a look at how the bank did on the three key criteria Bankrate used to grade U.S. banks.

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SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital is a useful measurement of an institution's financial fortitude. It works as a cushion against losses and provides protection for depositors when a bank is experiencing financial trouble. When it comes to safety and soundness, the more capital, the better.
On our test to measure the adequacy of a bank's capital, First Priority Bank received a score of 6 out of a possible 30 points, coming in below the national average of 13.38.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. First Priority Bank's Tier 1 capital ratio was 9.66 percent, above the 6 percent level considered adequate by regulators, but lower than the national average of 25.16 percent. The higher the capital ratio, the better the bank will be able to weather financial headwinds.

Overall, First Priority Bank held equity amounting to 8.12 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 troubled assets, such as unpaid mortgages, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

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

On Bankrate's asset quality test, First Priority Bank scored 40 out of a possible 40 points, above 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, 0.12 percent of First Priority Bank's loans were noncurrent, meaning 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 keep a reserve to deal with problem assets known as an "allowance for loan and lease losses." The size of that reserve can be a helpful 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 First Priority Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its long-term survivability. Earnings can be retained by the bank, boosting its capital cushion, or be used to deal with problematic loans, likely making the bank more resilient in times of trouble. Losses, on the other hand, diminish a bank's ability to do those things.

On Bankrate's earnings test, First Priority Bank scored 14 out of a possible 30, less than the national average of 16.52.

Return on equity, calculated by dividing net income (profit, essentially) by total equity, is one important measure of a bank's earnings. First Priority Bank's most recent annualized quarterly return on equity was 6.64 percent, below the national average of 9.28 percent.

The bank recorded net income of $1.6 million on total equity of $49.3 million for the twelve months ended June 30, 2017. The bank reported an annualized return on average assets, or ROA, of 0.53 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below 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.