Safe and Sound

First American State Bank

Greenwood Villag, CO
2
Star Rating
Greenwood Villag, CO-based First American State Bank is an FDIC-insured bank started in 1995. Regulatory filings show the bank having equity of $20.9 million on assets of $255.0 million, as of December 31, 2017.

Thanks to the efforts of 27 full-time employees, the bank has amassed loans and leases worth $183.1 million, including $175.5 million worth of real estate loans. U.S. bank customers currently have $200.6 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, First American State Bank exhibited a below-average condition, earning 2 out of 5 stars for safety and soundness. Keep reading for a breakdown of how the bank fared on the three key criteria Bankrate used to grade American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a buffer against losses and as protection for account holders during times of economic trouble for the bank. It follows then that a bank's level of capital is a key measurement of an institution's financial resilience. When looking at safety and soundness, the higher the capital, the better.

On our test to measure capital adequacy, First American State Bank received a score of 8 out of a possible 30 points, failing to reach the national average of 13.13.

One important measure of this buffer is a bank's Tier 1 capital ratio. First American State Bank's Tier 1 capital ratio was 14.27 percent, higher than the 6 percent level regulators consider adequate, but below the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather financial headwinds.

Overall, First American State Bank held equity amounting to 8.19 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to estimate the effect of troubled assets, such as past-due mortgages, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

Having lots of these types of assets could eventually require a bank to use capital to cover losses, shrinking its equity cushion. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, resulting in lower earnings and potentially more risk of a future failure.

First American State Bank scored 24 out of a possible 40 points on Bankrate's asset quality test, failing to reach the national average of 37.49.

The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of December 31, 2017, 0.01 percent of First American State 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 to handle troubled 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 troubled assets, especially when compared to the total amount of problem loans. First American State Bank's loan loss allowance was 9,820.00 percent of its total noncurrent loans, exceeding the national average. All things being equal, a higher ratio of loan loss allowance to noncurrent loans is better.

Earnings score

A bank's profitability has an effect on its safety and soundness. A bank can retain its earnings, expanding its capital cushion, or put them to work addressing problematic loans, potentially making the bank more resilient in tough times. Losses, on the other hand, diminish a bank's ability to do those things.

First American State Bank underperformed the average on Bankrate's earnings test, achieving a score of 8 out of a possible 30.

One important way to measure a bank's earnings is return on equity, calculated by dividing net income (profit, essentially) by total equity. First American State Bank's most recent annualized quarterly return on equity was 3.54 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $723,000 on total equity of $20.9 million. The bank experienced an annualized return on average assets, or ROA, of 0.27 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.