Safe and Sound

First State Bank

Abilene, TX
4
Star Rating
First State Bank is an Abilene, TX-based, FDIC-insured bank dating back to 1903. As of December 31, 2017, the bank held equity of $3.3 million on assets of $39.0 million.

Thanks to the work of 10 full-time employees in 2 offices in TX, the bank holds loans and leases worth $13.9 million, $8.7 million of which are for real estate. The bank currently holds $35.6 million in deposits from U.S. customers.

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 fared on the three important criteria Bankrate used to grade U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial strength, capital is valuable. It works as a bulwark against losses and affords protection for accountholders when a bank is experiencing economic trouble. When looking at safety and soundness, more capital is preferred.

First State Bank fell short of the national average of 13.13 on our test to measure the adequacy of a bank's capital, receiving a score of 6 out of a possible 30 points.

One essential measure of this buffer is a bank's Tier 1 capital ratio. First State Bank's Tier 1 capital ratio was 19.09 percent, above the 6 percent level regulators consider adequate, but less than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to economic challenges.

Overall, First State Bank held equity amounting to 8.50 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 problem assets, such as unpaid loans, on the bank's capitalization and allocated loan loss reserves.

A bank with a large number of these types of assets could eventually have to use capital to cover losses, reducing its cushion of equity. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, diminishing earnings and increasing the chances of a future failure.

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 .

The percentage of problem assets a bank holds compared to its total assets is a widely used 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 maintain a reserve to deal with problem assets known as an "allowance for loan and lease losses." Comparing the size of that reserve to the total amount of problematic loans can be a widely used 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

A bank's ability to earn money has an effect on its safety and soundness. A bank can retain its earnings, boosting its capital buffer, or use them to deal with problematic loans, likely making the bank more resilient in times of trouble. Losses, on the other hand, reduce a bank's ability to do those things.

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

Return on equity, calculated by dividing net income (essentially, profit) by total equity, is one important way to measure a bank's earnings. First State Bank's most recent annualized quarterly return on equity was 6.10 percent, below the national average of 8.10 percent.

The bank reported net income of $203,000 on total equity of $3.3 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 0.53 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.