Safe and Sound

First State Bank

Nashua, IA
5
Star Rating
Founded in 2005, First State Bank is an FDIC-insured bank headquartered in Nashua, IA. As of December 31, 2017, the bank had equity of $5.7 million on $48.2 million in assets.

Thanks to the efforts of 7 full-time employees, the bank currently holds loans and leases worth $34.7 million, including $16.4 million worth of real estate loans. U.S. bank customers currently have $37.3 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 a look at how the bank fared on the three major criteria Bankrate used to score American banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital is an essential measurement of an institution's financial strength. It acts as a cushion against losses and as protection for depositors during times of financial instability for the bank. When looking at safety and soundness, more capital is preferred.

First State Bank beat out the national average of 13.13 points on our test to measure capital adequacy, scoring 14 out of a possible 30 points.

A bank's Tier 1 capital ratio is a commonly used measure of this buffer. First State Bank's Tier 1 capital ratio was 16.33 percent, higher than the 6 percent level regulators consider adequate, but below the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather financial headwinds.

Overall, First State Bank held equity amounting to 11.73 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to estimate the effect of troubled assets, such as past-due loans, on the bank's capitalization and allocated loan loss reserves.

Having lots of these kinds of assets could eventually require a bank to use capital to cover losses, cutting down on its buffer of equity. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, resulting in reduced earnings and potentially more risk of a failure in the future.

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

A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.04 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 keep a reserve to handle troubled assets known as an "allowance for loan and lease losses." That reserve's size can be a handy indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problematic loans. First State Bank's loan loss allowance was 2,938.46 percent of its total noncurrent loans, higher than the national average. All else being equal, a higher ratio of loan loss allowance to noncurrent loans is better.

Earnings score

A bank's profitability has an effect on its safety and soundness. Earnings can be retained by the bank, boosting its capital cushion, or be used to address problematic loans, potentially making the bank better able to withstand economic trouble. Obviously, banks that are losing money are less able 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.

Return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for First State Bank was 9.83 percent, above the national average of 8.10 percent.

The bank recorded net income of $554,000 on total equity of $5.7 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 1.15 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.