Safe and Sound

First Credit Bank

Los Angeles, CA
5
Star Rating
First Credit Bank is a Los Angeles, CA-based, FDIC-insured bank started in 1983. Regulatory filings show the bank having equity of $181.0 million on $460.4 million in assets, as of December 31, 2017.

U.S. bank customers have $272.8 million on deposit at 2 offices in CA run by 27 full-time employees. With that footprint, the bank has amassed loans and leases worth $305.4 million, including $315.4 million worth of real estate loans.

Overall, Bankrate believes that, as of December 31, 2017, First Credit Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's an analysis of how the bank did on the three major criteria Bankrate used to grade U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital is a key measurement of an institution's financial fortitude. It works as a buffer against losses and as protection for depositors when a bank is struggling financially. From a safety and soundness perspective, more capital is preferred.

First Credit Bank scored 30 out of a possible 30 points on our test to measure capital adequacy, beating out the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. First Credit Bank's Tier 1 capital ratio was 47.09 percent, above the 6 percent level regulators consider adequate, and above the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather financial challenges.

Overall, First Credit Bank held equity amounting to 39.32 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test is intended to try to understand how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by troubled assets, such as unpaid loans.

A bank with lots of these types of assets could eventually be forced to use capital to absorb losses, reducing its buffer of equity. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning money, diminishing earnings and elevating the risk of a failure in the future.

On Bankrate's asset quality test, First Credit Bank scored 32 out of a possible 40 points, below the national average of 37.49 points.

A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 7.46 percent of First Credit Bank's loans were noncurrent, meaning they were more than 90 days past due or were in non-accrual status. That's above the national average of 1.01 percent.

Banks maintain a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . How large that reserve is can be a useful 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 First Credit Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its safety and soundness. Earnings may be retained by the bank, boosting its capital buffer, or be used to address problematic loans, likely making the bank better prepared to withstand financial trouble. Conversely, losses lessen a bank's ability to do those things.

On Bankrate's earnings test, First Credit Bank scored 24 out of a possible 30, beating the national average of 15.12.

One important measure of a bank's earnings is return on equity, or net income (profit, basically) divided by total equity. The most recent annualized quarterly return on equity for First Credit Bank was 15.06 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $27.5 million on total equity of $181.0 million. The bank had an annualized return on average assets, or ROA, of 5.66 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.