Safe and Sound

First State Bank

3
Star Rating
Tahlequah, OK-based First State Bank is an FDIC-insured bank started in 1977. Regulatory filings show the bank having equity of $8.4 million on $62.5 million in assets, as of December 31, 2017.

Thanks to the work of 22 full-time employees in 2 offices in OK, the bank holds loans and leases worth $35.9 million, including $28.7 million worth of real estate loans. U.S. bank customers currently have $54.0 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, First State Bank exhibited a generally satisfactory condition, earning 3 out of 5 stars for safety and soundness. Here's an analysis of how the bank fared on the three key criteria Bankrate used to evaluate American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a cushion against losses and affords protection for depositors during times of financial trouble for the bank. Therefore, a bank's level of capital is a crucial measurement of a bank's financial resilience. When looking at safety and soundness, the higher the capital, the better.

First State Bank scored 18 out of a possible 30 points on our test to measure capital adequacy, better than the national average of 13.13.

A bank's Tier 1 capital ratio is a widely used measure of this buffer. First State Bank's Tier 1 capital ratio was 19.62 percent, above the 6 percent level considered adequate by regulators, but lower than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather economic challenges.

Overall, First State Bank held equity amounting to 13.51 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

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

A bank with a large number of these types of assets may eventually be forced to use capital to absorb losses, shrinking its cushion of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning interest for the bank, resulting in reduced earnings and potentially more risk of a failure in the future.

First State Bank scored below the national average of 37.49 on Bankrate's asset quality test, racking up 36 out of a possible 40 points .

The percentage of problem assets a bank holds compared to its total assets is a useful indicator of asset quality.As of December 31, 2017, 1.17 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 maintain a reserve to handle troubled assets known as an "allowance for loan and lease losses." That reserve's size 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. 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 earnings performance affects its long-term survivability. A bank can retain its earnings, increasing its capital cushion, or use them to address problematic loans, potentially making the bank better prepared to withstand financial shocks. Conversely, losses diminish a bank's ability to do those things.

First State Bank scored 0 out of a possible 30 on Bankrate's test of earnings, less than the national average of 15.12.

One key measure of a bank's earnings is return on equity, or net income (profit, essentially) divided by total equity. The most recent annualized quarterly return on equity for First State Bank was -3.46 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $-300,000 on total equity of $8.4 million. The bank had an annualized return on average assets, or ROA, of -0.47 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.