Safe and Sound

Fremont Bank

Fremont, CA
5
Star Rating
Founded in 1964, Fremont Bank is an FDIC-insured bank based in Fremont, CA. The bank holds equity of $291.0 million on assets of $3.68 billion, according to June 30, 2017, regulatory filings.

U.S. bank customers have $3.35 billion on deposit at 21 offices in CA run by 801 full-time employees. With that footprint, the bank has amassed loans and leases worth $2.66 billion, including $2.47 billion worth of real estate loans.

Overall, Bankrate believes that, as of June 30, 2017, Fremont Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a look at how the bank faired on the three important criteria Bankrate used to score American banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

Capital is an essential measurement of an institution's financial resilience. It works as a buffer against losses and provides protection for depositors when a bank is experiencing economic instability. From a safety and soundness perspective, the higher the capital, the better.
Fremont Bank received a score of 6 out of a possible 30 points on our test to measure capital adequacy, lower than the national average of 13.38.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Fremont Bank's Tier 1 capital ratio was 10.51 percent, exceeding the 6 percent level regulators consider adequate, but under the national average of 25.16 percent. The higher the capital ratio, the better the bank will be able to weather economic downturns.

Overall, Fremont Bank held equity amounting to 7.91 percent of its assets, which was lower than the national average of 12.10 percent.

Asset Quality Score

In this test, Bankrate tries to estimate the effect of problem assets, such as past-due loans, on the bank's capitalization and allocated loan loss reserves.

A bank with extensive holdings of these kinds of assets could eventually be required to use capital to cover losses, cutting down on 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 diminished earnings and potentially more risk of a future failure.

Fremont Bank scored 40 out of a possible 40 points on Bankrate's asset quality test, above the national average of 37.62.

A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of June 30, 2017, 0.34 percent of Fremont 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 1.04 percent.

Banks maintain a reserve to deal with troubled assets known as an "allowance for loan and lease losses." That reserve's size can be a useful 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 Fremont Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its safety and soundness. A bank can retain its earnings, expanding its capital buffer, or put them to work addressing problematic loans, likely making the bank better prepared to withstand economic shocks. Losses, on the other hand, lessen a bank's ability to do those things.

On Bankrate's earnings test, Fremont Bank scored 26 out of a possible 30, above the national average of 16.52.

One key measure of a bank's earnings is return on equity, or net income (essentially profit) divided by total equity. Fremont Bank's most recent annualized quarterly return on equity was 16.33 percent, above the national average of 9.28 percent.

The bank reported net income of $23.3 million on total equity of $291.0 million for the twelve months ended June 30, 2017. The bank experienced an annualized return on average assets, or ROA, of 1.27 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.