Safe and Sound

The First Security Bank

Overbrook, KS
4
Star Rating
Started in 1904, The First Security Bank is an FDIC-insured bank based in Overbrook, KS. The bank has equity of $5.1 million on $57.7 million in assets, according to December 31, 2017, regulatory filings.

With 20 full-time employees in 3 offices in KS, the bank currently holds loans and leases worth $38.0 million, including real estate loans of $26.9 million. U.S. bank customers currently have $49.1 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, The First Security Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a breakdown of how the bank fared on the three key criteria Bankrate used to grade American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a bulwark against losses and provides protection for depositors when a bank is experiencing economic instability. Therefore, when it comes to measuring an an institution's financial fortitude, capital is crucial. When looking at safety and soundness, the more capital, the better.

On our test to measure capital adequacy, The First Security Bank received a score of 6 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. The First Security Bank's Tier 1 capital ratio was 11.94 percent, exceeding the 6 percent level considered adequate by regulators, 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 difficulties.

Overall, The First Security Bank held equity amounting to 8.91 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test is intended to estimate how the bank's loan loss reserves and overall capitalization could be affected by problem assets, such as unpaid mortgages.

Having a large number of these types of assets may eventually force a bank to use capital to cover losses, decreasing its equity buffer. 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, diminishing earnings and increasing the chances of a future failure.

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

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, 0.75 percent of The First Security 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 keep a reserve to deal with problem assets known as an "allowance for loan and lease losses." 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 The First Security Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability has an effect on its long-term survivability. A bank can retain its earnings, expanding its capital cushion, or use them to address problematic loans, potentially making the bank better able to withstand economic trouble. However, banks that are losing money are less able to do those things.

The First Security Bank beat the national average on Bankrate's earnings test, achieving a score of 18 out of a possible 30.

One widely used way to measure a bank's earnings is return on equity, or net income (profit, basically) divided by total equity. The most recent annualized quarterly return on equity for The First Security Bank was 8.06 percent, below the national average of 8.10 percent.

The bank earned net income of $419,000 on total equity of $5.1 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 0.73 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.