Safe and Sound

First State Bank of Odem

Odem, TX
5
Star Rating
First State Bank of Odem is an FDIC-insured bank founded in 1945 and currently based in Odem, TX. As of December 31, 2017, the bank had equity of $15.0 million on $143.2 million in assets.

U.S. bank customers have $128.0 million on deposit at 4 offices in TX run by 36 full-time employees. With that footprint, the bank holds loans and leases worth $72.6 million, $52.5 million of which are for real estate.

Overall, Bankrate believes that, as of December 31, 2017, First State Bank of Odem exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a look at how the bank did on the three key criteria Bankrate used to evaluate American banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

Capital is an important measurement of an institution's financial strength. It works as a bulwark against losses and provides protection for depositors when a bank is struggling financially. When looking at safety and soundness, more capital is preferred.

First State Bank of Odem received a score of 12 out of a possible 30 points on our test to measure capital adequacy, lower than 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 Odem's Tier 1 capital ratio was 19.69 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 economic difficulties.

Overall, First State Bank of Odem held equity amounting to 10.48 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to determine the impact of troubled assets, such as unpaid loans, on the bank's capitalization and allocated loan loss reserves.

Having lots of these types of assets may eventually require a bank to use capital to absorb losses, cutting down on its equity buffer. 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 failure in the future.

On Bankrate's test of asset quality, First State Bank of Odem scored 40 out of a possible 40 points, beating the national average of 37.49 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, none of First State Bank of Odem'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 deal with problem assets known as an "allowance for loan and lease losses." How large that reserve is can be a useful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on First State Bank of Odem's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability affects its long-term survivability. A bank can retain its earnings, increasing its capital buffer, or use them to deal with problematic loans, likely making the bank better able to withstand financial shocks. Losses, on the other hand, take away from a bank's ability to do those things.

First State Bank of Odem scored 18 out of a possible 30 on Bankrate's test of earnings, beating out the national average of 15.12.

One widely used way to measure a bank's earnings is return on equity, calculated by dividing net income (profit, basically) by total equity. First State Bank of Odem's most recent annualized quarterly return on equity was 8.40 percent, above the national average of 8.10 percent.

The bank recorded net income of $1.3 million on total equity of $15.0 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 0.94 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.