Safe and Sound

First Priority Bank

Malvern, PA
4
Star Rating
First Priority Bank is a Malvern, PA-based, FDIC-insured bank started in 2005. As of December 31, 2017, the bank held equity of $50.1 million on $609.7 million in assets.

U.S. bank customers have $523.3 million on deposit at 7 offices in PA run by 69 full-time employees. With that footprint, the bank has amassed loans and leases worth $515.5 million, including real estate loans of $443.5 million.

Overall, Bankrate believes that, as of December 31, 2017, First Priority Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a breakdown of how the bank fared on the three major criteria Bankrate used to evaluate U.S. 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 struggling financially. It follows then that when it comes to measuring an a bank's financial resilience, capital is valuable. When it comes to safety and soundness, the higher the capital, the better.

First Priority Bank finished below the national average of 13.13 on our test to measure capital adequacy, racking up 6 out of a possible 30 points.

A bank's Tier 1 capital ratio is an important measure of this buffer. First Priority Bank's Tier 1 capital ratio was 9.58 percent, above the 6 percent level considered adequate by regulators, but lower than the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to financial challenges.

Overall, First Priority Bank held equity amounting to 8.22 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to determine the effect of troubled assets, such as unpaid loans, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

A bank with a large number of these kinds of assets may eventually be required to use capital to absorb losses, reducing its cushion of equity. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, diminishing earnings and elevating the risk of a future failure.

First Priority Bank exceeded the national average of 37.49 on Bankrate's asset quality test, racking up 40 out of a possible 40 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, 0.17 percent of First Priority 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 maintain a reserve known as an "allowance for loan and lease losses" to deal with problem assets . Comparing how large that reserve is to the total amount of at-risk loans can be a handy indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on First Priority Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its safety and soundness. A bank can retain its earnings, expanding its capital buffer, or use them to deal with problematic loans, likely making the bank more resilient in tough times. Conversely, losses reduce a bank's ability to do those things.

First Priority Bank scored 12 out of a possible 30 on Bankrate's test of earnings, coming in below the national average of 15.12.

Return on equity, calculated by dividing net income (profit, essentially) by total equity, is one important measure of a bank's earnings. First Priority Bank's most recent annualized quarterly return on equity was 5.45 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $2.7 million on total equity of $50.1 million. The bank had an annualized return on average assets, or ROA, of 0.44 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.