Safe and Sound

First State Bank

2
Star Rating
First State Bank is an Elmore City, OK-based, FDIC-insured bank started in 1903. Regulatory filings show the bank having equity of $1.3 million on $11.3 million in assets, as of December 31, 2017.

Thanks to the work of 18 full-time employees, the bank has amassed loans and leases worth $7.9 million, $2.5 million of which are for real estate. The bank currently holds $9.7 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, First State Bank exhibited a below-average condition, earning 2 out of 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.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial fortitude, capital is valuable. It works as a cushion against losses and as protection for accountholders during periods of economic trouble for the bank. When looking at safety and soundness, more capital is preferred.

First State Bank came in below the national average of 13.13 on our test to measure the adequacy of a bank's capital, scoring 12 out of a possible 30 points.

A bank's Tier 1 capital ratio is a widely used measure of this buffer. First State Bank's Tier 1 capital ratio was 12.91 percent, exceeding the 6 percent level regulators consider adequate, but under the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to financial downturns.

Overall, First State Bank held equity amounting to 11.17 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to estimate how the bank's loan loss reserves and overall capitalization could be affected by problem assets, such as past-due mortgages.

Having lots of these types of assets could eventually force a bank to use capital to cover losses, diminishing its cushion of equity. 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 depressed earnings and potentially more risk of a future failure.

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

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, 1.52 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 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 problem 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's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its safety and soundness. Earnings can be retained by the bank, expanding its capital cushion, or be used to address problematic loans, potentially making the bank more resilient in tough times. Obviously, banks that are losing money are less able to do those things.

First State Bank fell behind the national average on Bankrate's earnings test, achieving a score of 0 out of a possible 30.

Return on equity, calculated by dividing net income (profit, essentially) by total equity, is one widely used measure of a bank's earnings. The most recent annualized quarterly return on equity for First State Bank was -7.99 percent, below the national average of 8.10 percent.

The bank recorded net income of $-103,000 on total equity of $1.3 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of -0.88 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.