Safe and Sound

The First State Bank of Arcadia

Arcadia, FL
5
Star Rating
Started in 1973, The First State Bank of Arcadia is an FDIC-insured bank based in Arcadia, FL. The bank has equity of $16.3 million on assets of $149.6 million, according to December 31, 2017, regulatory filings.

U.S. bank customers have $132.8 million on deposit at 3 offices in FL run by 37 full-time employees. With that footprint, the bank has amassed loans and leases worth $74.2 million, including $67.4 million worth of real estate loans.

Overall, Bankrate believes that, as of December 31, 2017, The First State Bank of Arcadia exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a look at how the bank fared on the three important criteria Bankrate used to evaluate American banks on safety and soundness.

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SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial resilience, capital is essential. It acts as a buffer against losses and as protection for depositors during periods of financial trouble for the bank. When it comes to safety and soundness, the higher the capital, the better.

The First State Bank of Arcadia came in below the national average of 13.13 on our test to measure the adequacy of a bank's capital, achieving a score of 12 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. The First State Bank of Arcadia's Tier 1 capital ratio was 22.22 percent, above the 6 percent level considered adequate by regulators, but less than the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to economic headwinds.

Overall, The First State Bank of Arcadia held equity amounting to 10.92 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 troubled assets, such as unpaid mortgages, on the bank's loan loss reserves and overall capitalization.

A bank with a large number of these kinds of assets may eventually be required to use capital to absorb losses, cutting down on its cushion of equity. Many of those assets are also likely to be in non-accrual status and no longer earning money, decreasing earnings and increasing the chances of a failure in the future.

On Bankrate's test of asset quality, The First State Bank of Arcadia scored 36 out of a possible 40 points, coming in below the national average of 37.49 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, 2.49 percent of The First State Bank of Arcadia'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 size of that reserve to the total amount of problem loans can be a widely used indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on The First State Bank of Arcadia's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance affects its long-term survivability. Earnings may be retained by the bank, boosting its capital buffer, or be used to address problematic loans, potentially making the bank better able to withstand financial shocks. Losses, on the other hand, reduce a bank's ability to do those things.

On Bankrate's earnings test, The First State Bank of Arcadia scored 22 out of a possible 30, beating out the national average of 15.12.

One key way to measure a bank's earnings is return on equity, or net income (essentially profit) divided by total equity. The First State Bank of Arcadia's most recent annualized quarterly return on equity was 12.08 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $2.0 million on total equity of $16.3 million. The bank experienced an annualized return on average assets, or ROA, of 1.40 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.