Safe and Sound

1st Security Bank of Washington

Mountlake Terrac, WA
5
Star Rating
Mountlake Terrac, WA-based 1st Security Bank of Washington is an FDIC-insured bank founded in 2004. The bank has equity of $126.5 million on $981.5 million in assets, according to December 31, 2017, regulatory filings.

With 326 full-time employees in 12 offices in WA, the bank holds loans and leases worth $815.0 million, including real estate loans of $510.6 million. U.S. bank customers currently have $838.9 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, 1st Security Bank of Washington 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 key criteria Bankrate used to evaluate American banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a bulwark against losses and provides protection for depositors when a bank is struggling financially. It follows then that when it comes to measuring an a bank's financial strength, capital is key. From a safety and soundness perspective, more capital is preferred.

1st Security Bank of Washington beat out the national average of 13.13 points on our test to measure capital adequacy, achieving a score of 14 out of a possible 30 points.

One essential measure of this buffer is a bank's Tier 1 capital ratio. 1st Security Bank of Washington's Tier 1 capital ratio was 15.00 percent, exceeding the 6 percent level considered adequate by regulators, but lower than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to financial challenges.

Overall, 1st Security Bank of Washington held equity amounting to 12.89 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to estimate how the bank's loan loss reserves and overall capitalization could be affected by troubled assets, such as unpaid loans.

Having lots of these kinds of assets may eventually force a bank to use capital to cover losses, reducing its equity buffer. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, decreasing earnings and elevating the chances of a failure in the future.

1st Security Bank of Washington scored 40 out of a possible 40 points on Bankrate's test of asset quality, beating the national average of 37.49.

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, 0.13 percent of 1st Security Bank of Washington'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 1.01 percent.

Banks keep a reserve to deal with troubled assets known as an "allowance for loan and lease losses." The size of that reserve can be a widely used indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on 1st Security Bank of Washington's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its long-term survivability. Earnings can be retained by the bank, increasing its capital cushion, or be used to address problematic loans, potentially making the bank more resilient in times of trouble. Losses, on the other hand, take away from a bank's ability to do those things.

1st Security Bank of Washington scored 20 out of a possible 30 on Bankrate's test of earnings, beating the national average of 15.12.

Return on equity, calculated by dividing net income (profit, essentially) by total equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for 1st Security Bank of Washington was 14.01 percent, above the national average of 8.10 percent.

The bank recorded net income of $14.6 million on total equity of $126.5 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 1.59 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.