Safe and Sound

First State Bank

New London, WI
4
Star Rating
Founded in 1911, First State Bank is an FDIC-insured bank based in New London, WI. The bank has equity of $38.1 million on $303.7 million in assets, according to December 31, 2017, regulatory filings.

With 55 full-time employees in 8 offices in WI, the bank has amassed loans and leases worth $139.4 million, including real estate loans of $110.6 million. U.S. bank customers currently have $257.1 million in deposits with the bank.

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 fared on the three major criteria Bankrate used to grade U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a cushion against losses and affords protection for account holders when a bank is struggling financially. Therefore, a bank's level of capital is an essential measurement of an institution's financial fortitude. From a safety and soundness perspective, the more capital, the better.

First State Bank racked up 16 out of a possible 30 points on our test to measure capital adequacy, beating the national average of 13.13.

A bank's Tier 1 capital ratio is an important measure of this buffer. First State Bank's Tier 1 capital ratio was 19.64 percent, above the 6 percent level regulators consider adequate, but less than the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to economic challenges.

Overall, First State Bank held equity amounting to 12.55 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to try to understand how the bank's capitalization and allocated loan loss reserves could be affected by problem assets, such as unpaid loans.

A bank with a large number of these types of assets could eventually be forced to use capital to cover losses, cutting down on 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, diminishing earnings and increasing the chances of a future failure.

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

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, 1.37 percent of First State Bank's loans were noncurrent, meaning 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 known as an "allowance for loan and lease losses" to deal with problem assets . How large that reserve is can be a helpful indicator when evaluating a bank's ability to manage troubled 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 long-term survivability. A bank can retain its earnings, boosting its capital cushion, or use them to deal with problematic loans, potentially making the bank better able to withstand economic trouble. Losses, on the other hand, take away from a bank's ability to do those things.

First State Bank scored 12 out of a possible 30 on Bankrate's earnings test, coming in below the national average of 15.12.

One widely used measure of a bank's earnings is return on equity, or net income (essentially profit) divided by total equity. The most recent annualized quarterly return on equity for First State Bank was 5.60 percent, below the national average of 8.10 percent.

The bank reported net income of $2.1 million on total equity of $38.1 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 0.71 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.