Safe and Sound

First State Bank

Mesquite, TX
4
Star Rating
Mesquite, TX-based First State Bank is an FDIC-insured bank started in 1962. The bank holds equity of $17.2 million on assets of $172.9 million, according to December 31, 2017, regulatory filings.

Thanks to the efforts of 32 full-time employees, the bank currently holds loans and leases worth $47.3 million, including real estate loans of $45.9 million. U.S. bank customers currently have $155.6 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. Keep reading for a breakdown of how the bank did on the three key criteria Bankrate used to grade American banks.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

Capital works as a buffer against losses and provides protection for depositors when a bank is experiencing economic trouble. Therefore, a bank's level of capital is a key measurement of an institution's financial strength. From a safety and soundness perspective, the more capital, the better.

First State Bank received a score of 10 out of a possible 30 points on our test to measure the adequacy of a bank's capital, less than 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 23.69 percent, higher than the 6 percent level regulators consider adequate, but less than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to financial difficulties.

Overall, First State Bank held equity amounting to 9.96 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to determine the effect of problem assets, such as past-due mortgages, on the bank's capitalization and allocated loan loss reserves.

Having a large number of these types of assets may eventually force a bank to use capital to absorb losses, shrinking its cushion of equity. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, resulting in lower earnings and potentially more risk of a future failure.

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 widely used indicator of asset quality.As of December 31, 2017, 0.16 percent 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 1.01 percent.

Banks keep a reserve known as an "allowance for loan and lease losses" to deal with problem assets . 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 problematic loans. First State Bank's loan loss allowance was 1,853.85 percent of its total noncurrent loans, higher than the national average. All else being equal, the higher the ratio of loan loss allowance to noncurrent loans, the better.

Earnings score

A bank's earnings performance 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 address problematic loans, likely making the bank better prepared to withstand economic trouble. Conversely, losses diminish a bank's ability to do those things.

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

One key way to measure a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by total equity. The most recent annualized quarterly return on equity for First State Bank was 6.31 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $1.1 million on total equity of $17.2 million. The bank had an annualized return on average assets, or ROA, of 0.61 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.