Safe and Sound

Paradise Bank

Boca Raton, FL
5
Star Rating
Paradise Bank is a Boca Raton, FL-based, FDIC-insured bank that opened its doors in 2005. As of December 31, 2017, the bank held equity of $33.4 million on assets of $309.8 million.

With 50 full-time employees in 3 offices in FL, the bank has amassed loans and leases worth $220.9 million, including real estate loans of $190.9 million. U.S. bank customers currently have $269.8 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Paradise Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a breakdown of how the bank did on the three major criteria Bankrate used to grade American banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a cushion against losses and provides protection for account holders during periods of financial instability for the bank. It follows then that a bank's level of capital is an important measurement of an institution's financial resilience. When it comes to safety and soundness, the more capital, the better.

Paradise Bank scored below the national average of 13.13 on our test to measure the adequacy of a bank's capital, receiving a score of 12 out of a possible 30 points.

One important measure of this buffer is a bank's Tier 1 capital ratio. Paradise Bank's Tier 1 capital ratio was 15.51 percent, higher than the 6 percent level regulators consider adequate, but below the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather economic downturns.

Overall, Paradise Bank held equity amounting to 10.79 percent of its assets, which was lower than 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 loans, on the bank's capitalization and allocated loan loss reserves.

A bank with a large number of these kinds of assets could eventually have to use capital to cover losses, decreasing its cushion of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, resulting in lower earnings and potentially more risk of a failure in the future.

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

A widely used 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 Paradise 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 keep a reserve to handle problem assets known as an "allowance for loan and lease losses." How large that reserve is can be a handy 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 Paradise Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability has an effect on its long-term survivability. Earnings can be retained by the bank, giving a boost to its capital buffer, or be used to address problematic loans, potentially making the bank better able to withstand economic trouble. Conversely, losses diminish a bank's ability to do those things.

Paradise Bank scored 30 out of a possible 30 on Bankrate's test of earnings, above the national average of 15.12.

One key measure of a bank's earnings is return on equity, or net income (profit, essentially) divided by the total amount of equity. Paradise Bank's most recent annualized quarterly return on equity was 21.21 percent, above the national average of 8.10 percent.

The bank recorded net income of $7.3 million on total equity of $33.4 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 2.30 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.