Safe and Sound

First State Bank

Randolph, NE
5
Star Rating
Started in 1935, First State Bank is an FDIC-insured bank headquartered in Randolph, NE. The bank holds equity of $8.1 million on assets of $61.0 million, according to December 31, 2017, regulatory filings.

With 9 full-time employees, the bank currently holds loans and leases worth $46.3 million, including real estate loans of $16.8 million. U.S. bank customers currently have $41.5 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. Here's a breakdown of how the bank did on the three important criteria Bankrate used to evaluate American banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a bulwark against losses and affords protection for depositors when a bank is experiencing financial trouble. It follows then that when it comes to measuring an a bank's financial strength, capital is useful. From a safety and soundness perspective, the higher the capital, the better.

First State Bank achieved a score of 18 out of a possible 30 points on our test to measure capital adequacy, above the national average of 13.13.

A bank's Tier 1 capital ratio is a widely used measure of this buffer. First State Bank's Tier 1 capital ratio was 16.06 percent, higher than the 6 percent level regulators consider adequate, but below the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to financial headwinds.

Overall, First State Bank held equity amounting to 13.34 percent of its assets, which exceeded 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 troubled assets, such as past-due mortgages.

Having extensive holdings of these types of assets means a bank may eventually have to use capital to cover losses, decreasing its equity cushion. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning interest for the bank, pushing down earnings and elevating the risk of a failure in the future.

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

The percentage of problem assets a bank holds compared to its total assets is a handy indicator of asset quality.As of December 31, 2017, none 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 problem assets . Comparing the size of that reserve to the total amount of problem loans can be a widely used indicator when evaluating a bank's ability to manage problem 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 affects its long-term survivability. Earnings can be retained by the bank, increasing its capital buffer, or be used to address problematic loans, likely making the bank better able to withstand financial shocks. Conversely, losses reduce a bank's ability to do those things.

First State Bank scored 22 out of a possible 30 on Bankrate's earnings test, exceeding the national average of 15.12.

One important way to measure a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by the total amount of equity. First State Bank's most recent annualized quarterly return on equity was 12.75 percent, above the national average of 8.10 percent.

The bank reported net income of $1.0 million on total equity of $8.1 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 1.63 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.