Safe and Sound

FinWise Bank

Sandy, UT
5
Star Rating
FinWise Bank is an FDIC-insured bank founded in 2000 and currently based in Sandy, UT. As of December 31, 2017, the bank held equity of $11.0 million on $65.1 million in assets.

With 32 full-time employees, the bank has amassed loans and leases worth $53.0 million, including real estate loans of $38.9 million. U.S. bank customers currently have $53.6 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, FinWise Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's an analysis of how the bank fared on the three important criteria Bankrate used to score American banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

Capital works 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 an institution's financial stability, capital is key. When it comes to safety and soundness, more capital is preferred.

On our test to measure the adequacy of a bank's capital, FinWise Bank racked up 22 out of a possible 30 points, beating the national average of 13.13.

A bank's Tier 1 capital ratio is a commonly used measure of this buffer. FinWise Bank's Tier 1 capital ratio was 19.51 percent, higher than the 6 percent level regulators consider adequate, but lower 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, FinWise Bank held equity amounting to 16.87 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test is intended to estimate how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by problem assets, such as past-due loans.

Having extensive holdings of these kinds of assets suggests a bank may eventually have to use capital to absorb 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 money, resulting in reduced earnings and potentially more risk of a failure in the future.

On Bankrate's test of asset quality, FinWise Bank scored 40 out of a possible 40 points, exceeding the national average of 37.49 points.

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, none of FinWise 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 1.01 percent.

Banks keep a reserve to deal with troubled assets known as an "allowance for loan and lease losses." How large that reserve is can be a widely used indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on FinWise Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance affects its safety and soundness. Earnings can be retained by the bank, expanding its capital buffer, or be used to address problematic loans, likely making the bank more resilient in tough times. However, banks that are losing money have less ability to do those things.

FinWise Bank scored 28 out of a possible 30 on Bankrate's test of earnings, beating out the national average of 15.12.

Return on equity, calculated by dividing net income (profit, basically) by total equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for FinWise Bank was 25.20 percent, above the national average of 8.10 percent.

The bank reported net income of $2.2 million on total equity of $11.0 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 3.80 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.