Safe and Sound

First State Bank

Waynesboro, MS
5
Star Rating
First State Bank is a Waynesboro, MS-based, FDIC-insured bank dating back to 1934. Regulatory filings show the bank having equity of $101.2 million on assets of $850.0 million, as of December 31, 2017.

U.S. bank customers have $639.4 million on deposit at 14 offices in MS run by 180 full-time employees. With that footprint, the bank has amassed loans and leases worth $543.4 million, including real estate loans of $469.7 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 an analysis of how the bank fared on the three key criteria Bankrate used to grade American banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a buffer against losses and affords protection for depositors when a bank is struggling financially. It follows then that a bank's level of capital is a crucial measurement of an institution's financial resilience. When looking at safety and soundness, the more capital, the better.

First State Bank fell short of the national average of 13.13 on our test to measure the adequacy of a bank's capital, scoring 12 out of a possible 30 points.

One important measure of this buffer is a bank's Tier 1 capital ratio. First State Bank's Tier 1 capital ratio was 16.37 percent, exceeding the 6 percent level considered adequate by regulators, but less than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather financial downturns.

Overall, First State Bank held equity amounting to 11.90 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to estimate the impact of problem assets, such as past-due mortgages, on the bank's capitalization and allocated loan loss reserves.

A bank with extensive holdings of these kinds of assets could eventually be forced to use capital to cover losses, reducing its buffer of equity. It also means that there are likely to be many assets that are in non-accrual status and no longer earning interest for the bank, resulting in diminished earnings and potentially more risk of a future failure.

On Bankrate's test of asset quality, 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 widely used indicator of asset quality.As of December 31, 2017, 0.49 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 troubled assets . Comparing the reserve's size to the total amount of problem loans can be a helpful 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

How profitable a bank is has an effect on its safety and soundness. A bank can retain its earnings, increasing its capital buffer, or use them to deal with problematic loans, likely making the bank more resilient in tough times. Losses, on the other hand, lessen a bank's ability to do those things.

First State Bank scored 18 out of a possible 30 on Bankrate's test of earnings, better than the national average of 15.12.

One important way to measure 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 8.77 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $8.9 million on total equity of $101.2 million. The bank had an annualized return on average assets, or ROA, of 1.07 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.