Safe and Sound

First State Bank

Socorro, NM
4
Star Rating
Founded in 1947, First State Bank is an FDIC-insured bank based in Socorro, NM. The bank has equity of $15.2 million on $153.3 million in assets, according to December 31, 2017, regulatory filings.

With 28 full-time employees in 3 offices in NM, the bank currently holds loans and leases worth $6.5 million, including real estate loans of $6.3 million. U.S. bank customers currently have $137.9 million in deposits with the bank.

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 a breakdown of how the bank did on the three major criteria Bankrate used to evaluate U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a cushion against losses and provides protection for depositors when a bank is experiencing financial trouble. Therefore, a bank's level of capital is a key measurement of a bank's financial strength. When it comes to safety and soundness, the higher the capital, the better.

First State Bank received a score of 10 out of a possible 30 points on our test to measure capital adequacy, falling short of 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 45.59 percent, above the 6 percent level considered adequate by regulators, and above the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather economic headwinds.

Overall, First State Bank held equity amounting to 9.93 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 loans.

A bank with a large number of these kinds of assets could eventually have to use capital to absorb losses, shrinking 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 diminished earnings and potentially more risk of a failure in the future.

First State Bank scored 40 out of a possible 40 points on Bankrate's asset quality test, above 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, none 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 known as an "allowance for loan and lease losses" to deal with problem assets . How large that reserve is can be a helpful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of at-risk loans. 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, giving a boost to its capital buffer, or use them to deal with problematic loans, likely making the bank more resilient in tough times. Banks that are losing money, however, are less able to do those things.

First State Bank fell short of the national average on Bankrate's test of earnings, achieving a score of 12 out of a possible 30.

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 5.17 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $769,000 on total equity of $15.2 million. The bank had an annualized return on average assets, or ROA, of 0.54 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.