Safe and Sound

Fort Davis State Bank

Fort Davis, TX
4
Star Rating
Fort Davis State Bank is a Fort Davis, TX-based, FDIC-insured bank started in 1911. The bank has equity of $7.7 million on assets of $83.3 million, according to December 31, 2017, regulatory filings.

U.S. bank customers have $75.3 million on deposit at 3 offices in TX run by 36 full-time employees. With that footprint, the bank currently holds loans and leases worth $39.1 million, including $19.8 million worth of real estate loans.

Overall, Bankrate believes that, as of December 31, 2017, Fort Davis State Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a look at how the bank fared on the three major criteria Bankrate used to grade American banks.

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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. Therefore, a bank's level of capital is a key measurement of an institution's financial resilience. When it comes to safety and soundness, the more capital, the better.

Fort Davis State Bank received a score of 10 out of a possible 30 points on our test to measure the adequacy of a bank's capital, failing to reach the national average of 13.13.

One widely used measure of this buffer is a bank's Tier 1 capital ratio. Fort Davis State Bank's Tier 1 capital ratio was 16.52 percent, exceeding the 6 percent level regulators consider adequate, but under the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather financial difficulties.

Overall, Fort Davis State Bank held equity amounting to 9.28 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 effect of troubled assets, such as past-due loans, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

A bank with extensive holdings of these kinds of assets could eventually be required to use capital to absorb losses, diminishing 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 money, decreasing earnings and increasing the chances of a failure in the future.

Fort Davis State Bank scored 36 out of a possible 40 points on Bankrate's test of asset quality, less than the national average of 37.49.

A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 2.30 percent of Fort Davis 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 above the national average of 1.01 percent.

Banks maintain a reserve to deal with troubled assets known as an "allowance for loan and lease losses." Comparing how large that reserve is to the total amount of at-risk loans can be a helpful indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Fort Davis State Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability has an effect on its safety and soundness. 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 economic trouble. However, banks that are losing money have less ability to do those things.

Fort Davis State Bank fell short of the national average on Bankrate's earnings test, achieving a score of 14 out of a possible 30.

Return on equity, calculated by dividing net income (profit, basically) by total equity, is one widely used measure of a bank's earnings. The most recent annualized quarterly return on equity for Fort Davis State Bank was 7.06 percent, below the national average of 8.10 percent.

The bank earned net income of $534,000 on total equity of $7.7 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.66 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.