Safe and Sound

First State Bank

Crossett, AR
4
Star Rating
First State Bank is an FDIC-insured bank started in 1964 and currently based in Crossett, AR. Regulatory filings show the bank having equity of $5.2 million on assets of $35.3 million, as of December 31, 2017.

U.S. bank customers have $29.9 million on deposit at 2 offices in AR run by 13 full-time employees. With that footprint, the bank holds loans and leases worth $19.3 million, $10.3 million of which are for real estate.

Overall, Bankrate believes that, as of December 31, 2017, First State Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's an analysis of how the bank did on the three major criteria Bankrate used to evaluate American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital is an essential measurement of an institution's financial strength. It works as a cushion against losses and affords protection for depositors when a bank is struggling financially. When looking at safety and soundness, more capital is preferred.

First State Bank did better than the national average of 13.13 points on our test to measure capital adequacy, achieving a score of 20 out of a possible 30 points.

One commonly used measure of this buffer is a bank's Tier 1 capital ratio. First State Bank's Tier 1 capital ratio was 25.26 percent, higher than the 6 percent level regulators consider adequate, but lower than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to financial difficulties.

Overall, First State Bank held equity amounting to 14.81 percent of its assets, which exceeded 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 problem assets, such as unpaid mortgages.

Having extensive holdings of these types of assets could eventually force a bank to use capital to absorb losses, decreasing its buffer of equity. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning interest for the bank, resulting in lower earnings and potentially more risk of a failure in the future.

First State Bank scored 32 out of a possible 40 points on Bankrate's test of asset quality, less than the national average of 37.49.

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, 1.66 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 . How large that reserve is can be a widely used indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on First State Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money has an effect on its safety and soundness. A bank can retain its earnings, increasing its capital buffer, or put them to work addressing problematic loans, potentially making the bank better able to withstand economic shocks. Obviously, banks that are losing money have less ability to do those things.

On Bankrate's test of earnings, First State Bank scored 14 out of a possible 30, coming in below the national average of 15.12.

One key way to measure a bank's earnings is return on equity, or net income (profit, basically) divided by the total amount of equity. First State Bank's most recent annualized quarterly return on equity was 6.98 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $351,000 on total equity of $5.2 million. The bank reported an annualized return on average assets, or ROA, of 0.98 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.