Safe and Sound

First Choice Bank

Cerritos, CA
5
Star Rating
First Choice Bank is a Cerritos, CA-based, FDIC-insured bank started in 2005. Regulatory filings show the bank having equity of $105.9 million on assets of $903.7 million, as of December 31, 2017.

With 107 full-time employees in 6 offices in CA, the bank holds loans and leases worth $741.8 million, including real estate loans of $610.0 million. U.S. bank customers currently have $772.8 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, First Choice 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 key criteria Bankrate used to grade American banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a cushion against losses and as protection for depositors when a bank is experiencing economic instability. It follows then that a bank's level of capital is a crucial measurement of a bank's financial strength. When looking at safety and soundness, the higher the capital, the better.

First Choice Bank beat out the national average of 13.13 points on our test to measure the adequacy of a bank's capital, racking up 14 out of a possible 30 points.

One commonly used measure of this buffer is a bank's Tier 1 capital ratio. First Choice Bank's Tier 1 capital ratio was 13.47 percent, above the 6 percent level considered adequate by regulators, but below the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather economic challenges.

Overall, First Choice Bank held equity amounting to 11.72 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to try to understand how the bank's loan loss reserves and overall capitalization could be affected by troubled assets, such as past-due loans.

Having lots of these kinds of assets may eventually force a bank to use capital to cover losses, diminishing its equity cushion. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning money, resulting in reduced earnings and potentially more risk of a failure in the future.

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

The percentage of problem assets a bank holds compared to its total assets is a widely used indicator of asset quality.As of December 31, 2017, 0.24 percent of First Choice 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 maintain a reserve to handle troubled assets known as an "allowance for loan and lease losses." That reserve's size can be a handy 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 Choice Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance has an effect on its safety and soundness. A bank can retain its earnings, increasing its capital cushion, or put them to work addressing problematic loans, likely making the bank more resilient in times of trouble. Losses, on the other hand, reduce a bank's ability to do those things.

On Bankrate's earnings test, First Choice Bank scored 16 out of a possible 30, beating the national average of 15.12.

One widely used measure of a bank's earnings is return on equity, or net income (profit, basically) divided by the total amount of equity. First Choice Bank's most recent annualized quarterly return on equity was 7.21 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $7.5 million on total equity of $105.9 million. The bank had an annualized return on average assets, or ROA, of 0.84 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.