Safe and Sound

First State Bank

Buxton, ND
5
Star Rating
Buxton, ND-based First State Bank is an FDIC-insured bank founded in 1885. The bank has equity of $18.7 million on assets of $185.3 million, according to December 31, 2017, regulatory filings.

U.S. bank customers have $152.9 million on deposit at 3 offices in ND run by 25 full-time employees. With that footprint, the bank has amassed loans and leases worth $161.2 million, including real estate loans of $112.4 million.

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 major criteria Bankrate used to score U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial resilience, capital is useful. It works as a bulwark against losses and affords protection for depositors when a bank is experiencing economic trouble. When looking at safety and soundness, more capital is preferred.

On our test to measure capital adequacy, First State Bank received a score of 12 out of a possible 30 points, coming in below 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 11.18 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 stand up to economic challenges.

Overall, First State Bank held equity amounting to 10.11 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to determine the impact of troubled assets, such as past-due mortgages, on the bank's capitalization and allocated loan loss reserves.

A bank with lots of these types of assets could eventually be forced to use capital to cover losses, reducing its equity buffer. Many of those assets are also likely to be in non-accrual status and no longer earning money, decreasing earnings and elevating the risk of a failure in the future.

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

A handy indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.12 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 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 how large that reserve is to the total amount of problematic loans can be a useful 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 has an effect on its long-term survivability. A bank can retain its earnings, boosting its capital buffer, or use them to address problematic loans, likely making the bank better able to withstand economic trouble. Banks that are losing money, however, have less ability to do those things.

First State Bank exceeded the national average on Bankrate's test of earnings, achieving a score of 22 out of a possible 30.

Return on equity, calculated by dividing net income (essentially, profit) by the total amount of equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for First State Bank was 12.23 percent, above the national average of 8.10 percent.

The bank reported net income of $2.6 million on total equity of $18.7 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 1.42 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.