Safe and Sound

First State Bank

Webster City, IA
5
Star Rating
First State Bank is an FDIC-insured bank founded in 1935 and currently based in Webster City, IA. Regulatory filings show the bank having equity of $56.0 million on $453.0 million in assets, as of December 31, 2017.

U.S. bank customers have $340.0 million on deposit at 7 offices in IA run by 120 full-time employees. With that footprint, the bank currently holds loans and leases worth $357.9 million, including real estate loans of $210.4 million.

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

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THE INSTITUTION'S SCORE

Capital Score

Capital is a valuable measurement of a bank's financial strength. It acts as a bulwark against losses and as protection for depositors during times of financial instability for the bank. When it comes to safety and soundness, more capital is better.

On our test to measure the adequacy of a bank's capital, First State Bank racked up 14 out of a possible 30 points, above the national average of 13.13.

One important measure of this buffer is a bank's Tier 1 capital ratio. First State Bank's Tier 1 capital ratio was 13.56 percent, exceeding the 6 percent level regulators consider adequate, but under the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather economic difficulties.

Overall, First State Bank held equity amounting to 12.35 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test is intended to estimate how the bank's capitalization and allocated loan loss reserves could be affected by problem assets, such as past-due loans.

Having lots of these types of assets may eventually require a bank to use capital to absorb losses, cutting down on its cushion of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, diminishing earnings and increasing the risk of a future failure.

On Bankrate's asset quality test, First State Bank scored 40 out of a possible 40 points, beating the national average of 37.49 points.

A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.07 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 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 . Comparing the size of that reserve to the total amount of at-risk loans can be a widely used indicator when evaluating a bank's ability to manage troubled assets. First State Bank's loan loss allowance was 1,465.49 percent of its total noncurrent loans, exceeding the national average. All things being equal, a higher ratio of loan loss allowance to noncurrent loans is better.

Earnings score

How profitable a bank is affects its long-term survivability. A bank can retain its earnings, giving a boost to its capital cushion, or use them to deal with problematic loans, likely making the bank more resilient in times of trouble. Banks that are losing money, however, are less able to do those things.

First State Bank scored 18 out of a possible 30 on Bankrate's test of earnings, beating the national average of 15.12.

One key measure of 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 9.08 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $4.9 million on total equity of $56.0 million. The bank experienced an annualized return on average assets, or ROA, of 1.17 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above 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.