Safe and Sound

First State Bank

Wilmot, SD
5
Star Rating
First State Bank is an FDIC-insured bank started in 1941 and currently headquartered in Wilmot, SD. Regulatory filings show the bank having equity of $5.3 million on assets of $48.7 million, as of December 31, 2017.

With 9 full-time employees in 2 offices in SD, the bank currently holds loans and leases worth $33.9 million, including real estate loans of $6.5 million. U.S. bank customers currently have $42.4 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 breakdown of how the bank did on the three important criteria Bankrate used to score American banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

Capital is an important measurement of an institution's financial resilience. It acts as a bulwark against losses and provides protection for accountholders when a bank is struggling financially. When it comes to safety and soundness, the higher the capital, the better.

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 12 out of a possible 30 points.

A bank's Tier 1 capital ratio is a widely used measure of this buffer. First State Bank's Tier 1 capital ratio was 13.17 percent, higher than the 6 percent level considered adequate by regulators, but below the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather financial difficulties.

Overall, First State Bank held equity amounting to 10.81 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to determine the effect of troubled assets, such as unpaid loans, on the bank's capitalization and allocated loan loss reserves.

Having lots of these types of assets may eventually require a bank 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 thus aren't earning money, pushing down earnings and increasing the chances of a future failure.

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

The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of December 31, 2017, 0.48 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 maintain a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . Comparing how large that reserve is to the total amount of problematic loans can be a useful 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

A bank's earnings performance affects its safety and soundness. A bank can retain its earnings, expanding its capital buffer, or use them to deal with problematic loans, potentially making the bank more resilient in tough times. Losses, on the other hand, reduce a bank's ability to do those things.

On Bankrate's test of earnings, First State Bank scored 26 out of a possible 30, beating out the national average of 15.12.

One key way to measure a bank's earnings is return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity. The most recent annualized quarterly return on equity for First State Bank was 17.74 percent, above the national average of 8.10 percent.

The bank recorded net income of $914,000 on total equity of $5.3 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 1.90 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.