Safe and Sound

First State Bank

Russellville, AR
5
Star Rating
First State Bank is a Russellville, AR-based, FDIC-insured bank started in 1934. The bank holds equity of $28.6 million on assets of $257.2 million, according to December 31, 2017, regulatory filings.

With 52 full-time employees in 5 offices in AR, the bank has amassed loans and leases worth $189.5 million, including real estate loans of $156.6 million. U.S. bank customers currently have $219.5 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, First State Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for an analysis of how the bank fared on the three key criteria Bankrate used to evaluate American banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial resilience, capital is essential. It works as a cushion against losses and as protection for depositors when a bank is struggling financially. When looking at safety and soundness, the higher the capital, the better.

On our test to measure capital adequacy, First State Bank achieved a score of 14 out of a possible 30 points, better 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's Tier 1 capital ratio was 14.06 percent, exceeding 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 stand up to economic headwinds.

Overall, First State Bank held equity amounting to 11.13 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

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

Having large numbers of these types of assets may eventually force a bank to use capital to absorb losses, decreasing its buffer of equity. Many of those assets are also likely to be 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 beat out the national average of 37.49 on Bankrate's test of asset quality, racking up 40 out of a possible 40 points .

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

Earnings score

How profitable a bank is affects its safety and soundness. A bank can retain its earnings, increasing its capital cushion, or use them to address problematic loans, potentially making the bank better able to withstand financial trouble. Conversely, losses lessen a bank's ability to do those things.

On Bankrate's earnings test, First State Bank scored 18 out of a possible 30, better than 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 the total amount of equity. First State Bank's most recent annualized quarterly return on equity was 9.45 percent, above the national average of 8.10 percent.

The bank earned net income of $2.6 million on total equity of $28.6 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 1.07 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.