Safe and Sound

First State Bank

Livingston, TX
5
Star Rating
Livingston, TX-based First State Bank is an FDIC-insured bank founded in 1910. Regulatory filings show the bank having equity of $52.2 million on $328.0 million in assets, as of December 31, 2017.

U.S. bank customers have $274.9 million on deposit at 5 offices in TX run by 91 full-time employees. With that footprint, the bank holds loans and leases worth $136.3 million, $67.3 million of which are for real estate.

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 key criteria Bankrate used to evaluate American banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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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, a bank's level of capital is a useful measurement of a bank's financial resilience. From a safety and soundness perspective, the more capital, the better.

On our test to measure the adequacy of a bank's capital, First State Bank racked up 22 out of a possible 30 points, better than the national average of 13.13.

One widely followed measure of this buffer is a bank's Tier 1 capital ratio. First State Bank's Tier 1 capital ratio was 35.38 percent, above the 6 percent level considered adequate by regulators, and higher than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather financial challenges.

Overall, First State Bank held equity amounting to 15.91 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 loan loss reserves and overall capitalization could be affected by problem assets, such as past-due loans.

A bank with large numbers of these types of assets may eventually have to use capital to absorb losses, reducing its cushion of equity. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, resulting in reduced earnings and potentially more risk of a failure in the future.

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

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, 1.98 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 maintain a reserve to handle problem 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

A bank's earnings performance has an effect on its safety and soundness. A bank can retain its earnings, increasing its capital cushion, or put them to work addressing problematic loans, potentially making the bank better able to withstand economic trouble. Losses, on the other hand, reduce a bank's ability to do those things.

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

Return on equity, calculated by dividing net income (profit, basically) by total equity, is one important measure of a bank's earnings. The most recent annualized quarterly return on equity for First State Bank was 5.33 percent, below the national average of 8.10 percent.

The bank recorded net income of $2.7 million on total equity of $52.2 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.84 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.