Safe and Sound

First Bank of Muleshoe

Muleshoe, TX
4
Star Rating
Started in 1955, First Bank of Muleshoe is an FDIC-insured bank based in Muleshoe, TX. The bank holds equity of $14.1 million on assets of $99.3 million, according to December 31, 2017, regulatory filings.

With 28 full-time employees in 3 offices in TX, the bank has amassed loans and leases worth $16.7 million, including real estate loans of $6.9 million. U.S. bank customers currently have $84.8 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, First Bank of Muleshoe exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a breakdown of how the bank did on the three major criteria Bankrate used to score American banks.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

Capital works as a bulwark against losses and as protection for account holders when a bank is experiencing financial trouble. It follows then that a bank's level of capital is an essential measurement of a bank's financial strength. When looking at safety and soundness, the more capital, the better.

First Bank of Muleshoe did better than the national average of 13.13 points on our test to measure capital adequacy, receiving a score of 20 out of a possible 30 points.

One important measure of this buffer is a bank's Tier 1 capital ratio. First Bank of Muleshoe's Tier 1 capital ratio was 62.91 percent, exceeding the 6 percent level considered adequate by regulators, and higher than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to financial challenges.

Overall, First Bank of Muleshoe held equity amounting to 14.22 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

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

Having lots of these types of assets could eventually force a bank to use capital to absorb losses, diminishing its cushion of equity. Many of those assets are also likely to be in non-accrual status and no longer earning money, resulting in lower earnings and potentially more risk of a failure in the future.

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

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, 0.54 percent of First Bank of Muleshoe'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 maintain a reserve to deal with 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 helpful indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on First Bank of Muleshoe's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance has an effect on its long-term survivability. Earnings may be retained by the bank, increasing its capital cushion, or be used to deal with problematic loans, likely making the bank more resilient in times of trouble. Banks that are losing money, however, are less able to do those things.

First Bank of Muleshoe scored 8 out of a possible 30 on Bankrate's test of earnings, below the national average of 15.12.

One key measure of a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by total equity. First Bank of Muleshoe's most recent annualized quarterly return on equity was 3.79 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $541,000 on total equity of $14.1 million. The bank reported an annualized return on average assets, or ROA, of 0.52 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.