Safe and Sound

Finance Factors, Ltd.

Honolulu, HI
4
Star Rating
Finance Factors, Ltd. is an FDIC-insured bank started in 1952 and currently headquartered in Honolulu, HI. As of December 31, 2017, the bank held equity of $63.0 million on assets of $566.4 million.

Thanks to the work of 123 full-time employees in 13 offices in multiple states, the bank currently holds loans and leases worth $380.8 million, including real estate loans of $387.3 million. The bank currently holds $465.2 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, Finance Factors, Ltd. exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a breakdown of how the bank did on the three major criteria Bankrate used to evaluate American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a buffer against losses and affords protection for depositors when a bank is experiencing financial trouble. Therefore, a bank's level of capital is a valuable measurement of a bank's financial strength. From a safety and soundness perspective, the higher the capital, the better.

Finance Factors, Ltd. fell short of the national average of 13.13 on our test to measure the adequacy of a bank's capital, scoring 12 out of a possible 30 points.

One essential measure of this buffer is a bank's Tier 1 capital ratio. Finance Factors, Ltd.'s Tier 1 capital ratio was 14.98 percent, higher than the 6 percent level considered adequate by regulators, but less than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to economic headwinds.

Overall, Finance Factors, Ltd. held equity amounting to 11.13 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

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

Having large numbers of these types of assets could eventually force a bank to use capital to absorb losses, reducing its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and no longer earning interest for the bank, resulting in lower earnings and potentially more risk of a failure in the future.

Finance Factors, Ltd. scored 40 out of a possible 40 points on Bankrate's asset quality test, beating out the national average of 37.49.

The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of December 31, 2017, 0.25 percent of Finance Factors, Ltd.'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 1.01 percent.

Banks maintain a reserve to deal with troubled assets known as an "allowance for loan and lease losses." Comparing how large that reserve is to the total amount of problem loans can be a widely used indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Finance Factors, Ltd.'s loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its long-term survivability. A bank can retain its earnings, giving a boost to its capital buffer, or use them to address problematic loans, potentially making the bank more resilient in tough times. Conversely, losses diminish a bank's ability to do those things.

Finance Factors, Ltd. scored 8 out of a possible 30 on Bankrate's earnings test, lower than the national average of 15.12.

One important way to measure a bank's earnings is return on equity, calculated by dividing net income (profit, basically) by the total amount of equity. Finance Factors, Ltd.'s most recent annualized quarterly return on equity was 3.89 percent, below the national average of 8.10 percent.

The bank earned net income of $2.4 million on total equity of $63.0 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 0.43 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below 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.