First State Bank of Swanville

THE INSTITUTION'S SCORE

Capital Score

Capital acts as a buffer against losses and as protection for account holders when a bank is struggling financially. It follows then that when it comes to measuring an an institution's financial fortitude, capital is essential. When looking at safety and soundness, more capital is better.

On our test to measure capital adequacy, First State Bank of Swanville achieved a score of 20 out of a possible 30 points, exceeding 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 Swanville's Tier 1 capital ratio was 21.27 percent, above the 6 percent level considered adequate by regulators, but lower than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to economic headwinds.

Overall, First State Bank of Swanville held equity amounting to 14.26 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to determine the impact of problem assets, such as past-due loans, 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 absorb losses, decreasing its equity cushion. It also means that there are likely to be many assets that are in non-accrual status and no longer earning interest for the bank, resulting in diminished earnings and potentially more risk of a failure in the future.

First State Bank of Swanville scored 32 out of a possible 40 points on Bankrate's test of asset quality, lower than the national average of 37.49.

A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 3.85 percent of First State Bank of Swanville's loans were noncurrent, meaning they were more than 90 days past due or were in non-accrual status. That's above the national average of 1.01 percent.

Banks keep a reserve known as an "allowance for loan and lease losses" to deal with problem assets . Comparing how large that reserve is to the total amount of problematic loans can be a helpful indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on First State Bank of Swanville's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance affects its long-term survivability. Earnings can be retained by the bank, boosting its capital buffer, or be used to address problematic loans, potentially making the bank better prepared to withstand financial trouble. Conversely, losses reduce a bank's ability to do those things.

First State Bank of Swanville received below-average marks on Bankrate's test of earnings, achieving a score of 2 out of a possible 30.

One key way to measure a bank's earnings is return on equity, or net income (essentially profit) divided by total equity. First State Bank of Swanville's most recent annualized quarterly return on equity was 0.67 percent, below the national average of 8.10 percent.

The bank recorded net income of $25,000 on total equity of $3.7 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.10 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below the average for U.S. banks of 1.00 percent.