Safe and Sound

First Sound Bank

Seattle, WA
1
Star Rating
First Sound Bank is an FDIC-insured bank started in 2004 and currently headquartered in Seattle, WA. As of December 31, 2017, the bank held equity of $13.2 million on assets of $144.4 million.

Thanks to the efforts of 21 full-time employees, the bank holds loans and leases worth $121.6 million, including $63.0 million worth of real estate loans. The bank currently holds $120.5 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, First Sound Bank exhibited a significantly below-average condition, earning 1 out of 5 stars for safety and soundness. Here's a breakdown of how the bank fared on the three important criteria Bankrate used to score U.S. banks.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a cushion against losses and provides protection for depositors during times of financial trouble for the bank. It follows then that when it comes to measuring an a bank's financial fortitude, capital is key. When looking at safety and soundness, the higher the capital, the better.

On our test to measure the adequacy of a bank's capital, First Sound Bank received a score of 8 out of a possible 30 points, falling short of the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. First Sound Bank's Tier 1 capital ratio was 11.04 percent, exceeding 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 weather financial difficulties.

Overall, First Sound Bank held equity amounting to 9.14 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test is intended to estimate how the bank's loan loss reserves and overall capitalization could be affected by problem assets, such as unpaid loans.

Having a large number of these kinds of assets could eventually force a bank 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 thus aren't earning interest for the bank, resulting in diminished earnings and potentially more risk of a future failure.

First Sound Bank scored 12 out of a possible 40 points on Bankrate's asset quality test, coming in below the national average of 37.49.

The percentage of problem assets a bank holds compared to its total assets is a handy indicator of asset quality.As of December 31, 2017, 4.45 percent of First Sound Bank's loans were noncurrent -- in other words, 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 keep a reserve to handle troubled assets known as an "allowance for loan and lease losses." The size of that reserve can be a useful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on First Sound Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money affects its safety and soundness. A bank can retain its earnings, boosting its capital cushion, or use them to deal with problematic loans, potentially making the bank more resilient in tough times. However, banks that are losing money have less ability to do those things.

First Sound Bank scored 6 out of a possible 30 on Bankrate's test of earnings, failing to reach the national average of 15.12.

Return on equity, calculated by dividing net income (essentially, profit) by total equity, is one important measure of a bank's earnings. The most recent annualized quarterly return on equity for First Sound Bank was 2.52 percent, below the national average of 8.10 percent.

The bank recorded net income of $309,000 on total equity of $13.2 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.22 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.