Safe and Sound

First State Bank of Colfax

Colfax, IA
5
Star Rating
Colfax, IA-based First State Bank of Colfax is an FDIC-insured bank started in 1933. Regulatory filings show the bank having equity of $13.1 million on $71.2 million in assets, as of December 31, 2017.

Thanks to the efforts of 9 full-time employees, the bank has amassed loans and leases worth $23.6 million, $13.3 million of which are for real estate. U.S. bank customers currently have $54.4 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, First State Bank of Colfax 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 important criteria Bankrate used to evaluate American banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial stability, capital is crucial. It works as a bulwark against losses and affords protection for depositors when a bank is experiencing financial trouble. From a safety and soundness perspective, the higher the capital, the better.

On our test to measure the adequacy of a bank's capital, First State Bank of Colfax achieved a score of 28 out of a possible 30 points, above the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. First State Bank of Colfax's Tier 1 capital ratio was 36.34 percent, above the 6 percent level regulators consider adequate, and exceeding the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather financial headwinds.

Overall, First State Bank of Colfax held equity amounting to 18.46 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to estimate the effect of problem assets, such as unpaid mortgages, on the bank's loan loss reserves and overall capitalization.

A bank with large numbers of these types of assets could eventually be forced 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 no longer earning interest for the bank, diminishing earnings and elevating the risk of a future failure.

First State Bank of Colfax exceeded the national average of 37.49 on Bankrate's test of asset quality, racking up 40 out of a possible 40 points .

The percentage of problem assets a bank holds compared to its total assets is a widely used indicator of asset quality.As of December 31, 2017, 0.16 percent of First State Bank of Colfax'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 deal with problem assets known as an "allowance for loan and lease losses." That reserve's size can be a useful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of at-risk loans. First State Bank of Colfax's loan loss allowance was 1,446.15 percent of its total noncurrent loans, exceeding the national average. All else being equal, a higher ratio of loan loss allowance to noncurrent loans is better.

Earnings score

How profitable a bank is has an effect on its long-term survivability. A bank can retain its earnings, expanding its capital buffer, or use them to deal with problematic loans, likely making the bank better prepared to withstand economic shocks. However, banks that are losing money have less ability to do those things.

First State Bank of Colfax scored 20 out of a possible 30 on Bankrate's test of earnings, exceeding 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 State Bank of Colfax was 10.44 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $1.4 million on total equity of $13.1 million. The bank had an annualized return on average assets, or ROA, of 1.94 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.