First State Bank

THE INSTITUTION'S SCORE

Capital Score

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

First State Bank racked up 16 out of a possible 30 points on our test to measure capital adequacy, beating 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 31.43 percent, above the 6 percent level regulators consider adequate, and exceeding the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather financial downturns.

Overall, First State Bank held equity amounting to 12.11 percent of its assets, which exceeded 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 troubled assets, such as unpaid mortgages.

Having lots of these types of assets means a bank may eventually have to use capital to absorb losses, cutting down on its equity buffer. 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, diminishing earnings and increasing the chances of a failure in the future.

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

The percentage of problem assets a bank holds compared to its total assets is a handy indicator of asset quality.As of December 31, 2017, 0.03 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 troubled assets known as an "allowance for loan and lease losses." The size of that reserve can be a helpful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of at-risk loans. First State Bank's loan loss allowance was 9,528.57 percent of its total noncurrent loans, exceeding the national average. All else being equal, a higher ratio of loan loss allowance to noncurrent loans is better.

Earnings score

How profitable a bank is affects its safety and soundness. Earnings may be retained by the bank, boosting its capital buffer, or be used to deal with problematic loans, likely making the bank better prepared to withstand economic shocks. However, banks that are losing money are less able to do those things.

First State Bank scored 18 out of a possible 30 on Bankrate's earnings test, better than the national average of 15.12.

Return on equity, calculated by dividing net income (profit, essentially) by total equity, is one key measure of a bank's earnings. First State Bank's most recent annualized quarterly return on equity was 8.20 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $1.0 million on total equity of $12.2 million. The bank reported an annualized return on average assets, or ROA, of 1.08 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above the average for U.S. banks of 1.00 percent.