Safe and Sound

First State Bank

Holly Springs, MS
4
Star Rating
Founded in 1916, First State Bank is an FDIC-insured bank based in Holly Springs, MS. Regulatory filings show the bank having equity of $11.9 million on $116.2 million in assets, as of December 31, 2017.

U.S. bank customers have $103.8 million on deposit at 3 offices in MS run by 36 full-time employees. With that footprint, the bank holds loans and leases worth $60.0 million, $47.9 million of which are for real estate.

Overall, Bankrate believes that, as of December 31, 2017, First State Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a breakdown of how the bank did on the three important criteria Bankrate used to score U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a buffer against losses and as protection for account holders when a bank is struggling financially. Therefore, when it comes to measuring an an institution's financial resilience, capital is crucial. When it comes to safety and soundness, the higher the capital, the better.

On our test to measure capital adequacy, First State Bank received a score of 12 out of a possible 30 points, falling short of 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 17.89 percent, higher than the 6 percent level considered adequate by regulators, but under the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to financial difficulties.

Overall, First State Bank held equity amounting to 10.22 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to estimate the impact of problem assets, such as past-due loans, on the bank's loan loss reserves and overall capitalization.

Having large numbers of these kinds of assets may eventually require a bank to use capital to cover losses, cutting down on its buffer 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, diminishing earnings and elevating the chances of a future failure.

First State Bank scored 32 out of a possible 40 points on Bankrate's asset quality test, less than the national average of 37.49.

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, 1.24 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 problem 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 problem assets, especially when compared to the total amount of problematic 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 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, take away from a bank's ability to do those things.

First State Bank scored 14 out of a possible 30 on Bankrate's test of earnings, failing to reach the national average of 15.12.

One important measure of a bank's earnings is return on equity, or net income (profit, basically) divided by the total amount of equity. First State Bank's most recent annualized quarterly return on equity was 6.28 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $743,000 on total equity of $11.9 million. The bank had an annualized return on average assets, or ROA, of 0.64 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.