Safe and Sound

Elsa State Bank and Trust Company

Elsa, TX
5
Star Rating
Elsa State Bank and Trust Company is an Elsa, TX-based, FDIC-insured bank dating back to 1945. The bank has equity of $19.6 million on assets of $191.2 million, according to December 31, 2017, regulatory filings.

U.S. bank customers have $170.6 million on deposit at 6 offices in TX run by 96 full-time employees. With that footprint, the bank has amassed loans and leases worth $127.6 million, including $96.6 million worth of real estate loans.

Overall, Bankrate believes that, as of December 31, 2017, Elsa State Bank and Trust Company exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's an analysis of how the bank fared on the three major criteria Bankrate used to grade U.S. 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 depositors when a bank is experiencing economic trouble. Therefore, a bank's level of capital is a useful measurement of a bank's financial strength. When looking at safety and soundness, more capital is preferred.

On our test to measure capital adequacy, Elsa State Bank and Trust Company received a score of 12 out of a possible 30 points, coming in below the national average of 13.13.

One essential measure of this buffer is a bank's Tier 1 capital ratio. Elsa State Bank and Trust Company's Tier 1 capital ratio was 17.04 percent, above 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 stand up to economic downturns.

Overall, Elsa State Bank and Trust Company held equity amounting to 10.24 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 capitalization and allocated loan loss reserves could be affected by troubled assets, such as past-due loans.

A bank with lots of these kinds of assets could eventually be forced to use capital to cover losses, cutting down on its buffer of equity. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, pushing down earnings and elevating the chances of a failure in the future.

Elsa State Bank and Trust Company did better than the national average of 37.49 on Bankrate's test of asset quality, 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, 0.30 percent of Elsa State Bank and Trust Company'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 to handle troubled assets known as an "allowance for loan and lease losses." Comparing the size of that reserve to the total amount of problem loans can be a widely used indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Elsa State Bank and Trust Company's loan loss allowance in its most recent filings.

Earnings score

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

Elsa State Bank and Trust Company scored 20 out of a possible 30 on Bankrate's earnings test, better than 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. Elsa State Bank and Trust Company's most recent annualized quarterly return on equity was 12.20 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $2.3 million on total equity of $19.6 million. The bank experienced an annualized return on average assets, or ROA, of 1.22 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.