Safe and Sound

First Choice Bank

Pontotoc, MS
5
Star Rating
Founded in 1900, First Choice Bank is an FDIC-insured bank based in Pontotoc, MS. As of December 31, 2017, the bank had equity of $36.0 million on assets of $291.6 million.

Thanks to the work of 74 full-time employees in 3 offices in MS, the bank currently holds loans and leases worth $173.5 million, including real estate loans of $121.6 million. U.S. bank customers currently have $253.0 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. 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.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital is a valuable measurement of an institution's financial fortitude. It acts as a bulwark against losses and as protection for accountholders during periods of financial instability for the bank. From a safety and soundness perspective, the more capital, the better.

First Choice Bank did better than the national average of 13.13 points on our test to measure the adequacy of a bank's capital, receiving a score of 16 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. First Choice Bank's Tier 1 capital ratio was 18.74 percent, higher than 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 stand up to financial headwinds.

Overall, First Choice Bank held equity amounting to 12.35 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

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

Having large numbers of these types of assets suggests a bank could eventually have to use capital to absorb losses, reducing its equity buffer. Many of those assets are also likely to be in non-accrual status and no longer earning money, resulting in depressed earnings and potentially more risk of a future failure.

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

The percentage of problem assets a bank holds compared to its total assets is a useful indicator of asset quality.As of December 31, 2017, 0.60 percent of First Choice Bank'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 keep a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . 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 at-risk loans. Unfortunately, the FDIC did not provide information on First Choice Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its safety and soundness. Earnings may be retained by the bank, increasing its capital cushion, or be used to deal with problematic loans, potentially making the bank more resilient in times of trouble. Losses, on the other hand, lessen a bank's ability to do those things.

On Bankrate's earnings test, First Choice Bank scored 14 out of a possible 30, coming in below 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. First Choice Bank's most recent annualized quarterly return on equity was 6.70 percent, below the national average of 8.10 percent.

The bank reported net income of $2.5 million on total equity of $36.0 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.87 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.