Safe and Sound

First State Bank

Chico, TX
2
Star Rating
Founded in 1958, First State Bank is an FDIC-insured bank based in Chico, TX. As of December 31, 2017, the bank held equity of $19.3 million on assets of $180.2 million.

Thanks to the work of 43 full-time employees in 4 offices in TX, the bank currently holds loans and leases worth $68.0 million, $47.4 million of which are for real estate. The bank currently holds $152.2 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, First State Bank exhibited a below-average condition, earning 2 out of 5 stars for safety and soundness. Keep reading for an analysis of how the bank fared on the three key criteria Bankrate used to grade U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a bulwark against losses and affords protection for account holders during times of economic trouble for the bank. Therefore, a bank's level of capital is an important measurement of a bank's financial resilience. From a safety and soundness perspective, more capital is preferred.

On our test to measure the adequacy of a bank's capital, First State Bank received a score of 12 out of a possible 30 points, 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 18.53 percent, higher than the 6 percent level regulators consider adequate, but lower than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather economic difficulties.

Overall, First State Bank held equity amounting to 10.70 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test is intended to try to understand how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by problem assets, such as unpaid mortgages.

A bank with large numbers of these types of assets could eventually be required to use capital to absorb losses, decreasing its equity buffer. Many of those assets are also likely to be in non-accrual status and no longer earning money, diminishing earnings and increasing the risk of a future failure.

First State Bank came in below the national average of 37.49 on Bankrate's asset quality test, racking up 28 out of a possible 40 points .

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, 6.60 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." Comparing the reserve's size to the total amount of problematic loans can be a widely used 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. A bank can retain its earnings, giving a boost to its capital buffer, or use them to deal with problematic loans, likely making the bank better prepared to withstand economic trouble. Obviously, banks that are losing money have less ability to do those things.

On Bankrate's test of earnings, First State Bank scored 2 out of a possible 30, less than the national average of 15.12.

Return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity, is one important measure of a bank's earnings. First State Bank's most recent annualized quarterly return on equity was 0.82 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $161,000 on total equity of $19.3 million. The bank reported an annualized return on average assets, or ROA, of 0.09 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.