Safe and Sound

First State Bank

Yoakum, TX
5
Star Rating
Founded in 1931, First State Bank is an FDIC-insured bank headquartered in Yoakum, TX. As of December 31, 2017, the bank held equity of $21.0 million on $196.2 million in assets.

With 44 full-time employees in 3 offices in TX, the bank currently holds loans and leases worth $95.9 million, including real estate loans of $65.2 million. U.S. bank customers currently have $173.6 million in deposits with the bank.

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. Keep reading for a look at how the bank fared on the three important criteria Bankrate used to score American banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital is a valuable measurement of an institution's financial resilience. It acts as a buffer against losses and provides protection for accountholders when a bank is experiencing economic instability. When looking at safety and soundness, the higher the capital, the better.

First State Bank fell below the national average of 13.13 on our test to measure the adequacy of a bank's capital, achieving a score of 12 out of a possible 30 points.

A bank's Tier 1 capital ratio is a widely followed measure of this buffer. First State Bank's Tier 1 capital ratio was 20.99 percent, exceeding the 6 percent level considered adequate by regulators, but lower than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to financial challenges.

Overall, First State Bank held equity amounting to 10.72 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test is intended to estimate how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by troubled assets, such as past-due mortgages.

A bank with a large number of these kinds of assets could eventually be required to use capital to absorb losses, decreasing 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, reducing earnings and increasing the risk of a future failure.

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, 2.27 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 keep a reserve to deal with troubled assets known as an "allowance for loan and lease losses." Comparing the reserve's size to the total amount of problem loans can be a handy indicator when evaluating a bank's ability to manage troubled assets. 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. Earnings may be retained by the bank, increasing its capital cushion, or be used to deal with problematic loans, likely making the bank more resilient in tough times. Losses, on the other hand, lessen a bank's ability to do those things.

First State Bank exceeded the national average on Bankrate's earnings test, achieving a score of 24 out of a possible 30.

Return on equity, calculated by dividing net income (essentially, profit) by the total amount of equity, is one important way to measure a bank's earnings. First State Bank's most recent annualized quarterly return on equity was 14.59 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $3.0 million on total equity of $21.0 million. The bank had an annualized return on average assets, or ROA, of 1.60 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.