Safe and Sound

First State Bank of Colorado

Hotchkiss, CO
3
Star Rating
First State Bank of Colorado is an FDIC-insured bank founded in 1930 and currently based in Hotchkiss, CO. Regulatory filings show the bank having equity of $26.6 million on $217.4 million in assets, as of December 31, 2017.

With 59 full-time employees in 7 offices in CO, the bank currently holds loans and leases worth $144.6 million, including real estate loans of $125.1 million. U.S. bank customers currently have $190.1 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, First State Bank of Colorado exhibited a generally satisfactory condition, earning 3 out of 5 stars for safety and soundness. Here's an analysis of how the bank did on the three major criteria Bankrate used to score U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a buffer against losses and provides protection for depositors when a bank is struggling financially. Therefore, when it comes to measuring an an institution's financial strength, capital is essential. When it comes to safety and soundness, the higher the capital, the better.

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

A bank's Tier 1 capital ratio is a commonly used measure of this buffer. First State Bank of Colorado's Tier 1 capital ratio was 15.87 percent, exceeding the 6 percent level regulators consider adequate, but less than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather financial challenges.

Overall, First State Bank of Colorado held equity amounting to 12.25 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to try to understand how the bank's loan loss reserves and overall capitalization could be affected by problem assets, such as unpaid mortgages.

A bank with a large number of these kinds of assets could eventually be required to use capital to cover losses, cutting down on its equity cushion. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning money, resulting in reduced earnings and potentially more risk of a future failure.

First State Bank of Colorado scored below the national average of 37.49 on Bankrate's test of asset quality, racking up 36 out of a possible 40 points .

A helpful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.93 percent of First State Bank of Colorado'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." Comparing the size of that reserve to the total amount of problematic 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 State Bank of Colorado's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its safety and soundness. 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 more resilient in tough times. Banks that are losing money, however, have less ability to do those things.

First State Bank of Colorado received below-average marks on Bankrate's test of earnings, achieving a score of 4 out of a possible 30.

Return on equity, calculated by dividing net income (profit, basically) by the total amount of equity, is one important way to measure a bank's earnings. First State Bank of Colorado's most recent annualized quarterly return on equity was 1.18 percent, below the national average of 8.10 percent.

The bank reported net income of $317,000 on total equity of $26.6 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 0.15 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.