Safe and Sound

First State Bank

Sioux Rapids, IA
4
Star Rating
Started in 1930, First State Bank is an FDIC-insured bank based in Sioux Rapids, IA. Regulatory filings show the bank having equity of $5.7 million on assets of $41.5 million, as of June 30, 2017.

With 8 full-time employees in 2 offices in IA, the bank has amassed loans and leases worth $9.2 million, including real estate loans of $3.1 million. U.S. bank customers currently have $35.6 million in deposits with the bank.

Overall, Bankrate believes that, as of June 30, 2017, First State Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a breakdown of how the bank did on the three key criteria Bankrate used to evaluate U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital is a valuable measurement of a bank's financial fortitude. It acts as a cushion against losses and as protection for accountholders during periods of financial trouble for the bank. When looking at safety and soundness, the more capital, the better.
First State Bank scored 18 out of a possible 30 points on our test to measure capital adequacy, beating out the national average of 13.38.

A bank's Tier 1 capital ratio is a widely followed measure of this buffer. First State Bank's Tier 1 capital ratio was 39.34 percent, higher than the 6 percent level considered adequate by regulators, and higher than the national average of 25.16 percent. A higher capital ratio suggests the bank will be better able to stand up to financial headwinds.

Overall, First State Bank held equity amounting to 13.83 percent of its assets, which exceeded the national average of 12.10 percent.

Asset Quality Score

This test is intended to try to understand how the bank's reserves set aside to cover loan losses, as well as overall capitalization could be affected by troubled assets, such as unpaid mortgages.

Having large numbers of these types of assets suggests a bank could eventually have to use capital to absorb losses, reducing its equity buffer. Many of those assets are also likely to be in non-accrual status and thus aren't earning interest for the bank, pushing down earnings and increasing the chances of a failure in the future.

On Bankrate's asset quality test, First State Bank scored 40 out of a possible 40 points, exceeding the national average of 37.62 points.

The percentage of problem assets a bank holds compared to its total assets is a widely used indicator of asset quality.As of June 30, 2017, none of First State Bank's loans were noncurrent, meaning they were more than 90 days past due or were in non-accrual status. That's below the national average of 1.04 percent.

Banks maintain a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . Comparing the that reserve's size to the total amount of at-risk 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 has an effect on its long-term survivability. A bank can retain its earnings, expanding its capital cushion, or use them to address problematic loans, likely making the bank more resilient in tough times. Conversely, losses reduce a bank's ability to do those things.

First State Bank fell behind the national average on Bankrate's test of earnings, achieving a score of 10 out of a possible 30.

One key measure of a bank's earnings is return on equity, or net income (profit, essentially) divided by total equity. First State Bank's most recent annualized quarterly return on equity was 4.52 percent, below the national average of 9.28 percent.

For the twelve months ended June 30, 2017, the bank reported net income of $129,000 on total equity of $5.7 million. The bank had an annualized return on average assets, or ROA, of 0.62 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below the average for U.S. banks of 1.14 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.