Safe and Sound

The First State Bank of Healy

Healy, KS
5
Star Rating
Healy, KS-based The First State Bank of Healy is an FDIC-insured bank started in 1906. The bank holds equity of $15.6 million on $81.8 million in assets, according to December 31, 2017, regulatory filings.

With 11 full-time employees, the bank holds loans and leases worth $42.0 million, including real estate loans of $15.4 million. U.S. bank customers currently have $64.6 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, The First State Bank of Healy exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for an analysis of how the bank did on the three major criteria Bankrate used to score American banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a buffer against losses and as protection for account holders during periods of economic trouble for the bank. Therefore, a bank's level of capital is a useful measurement of an institution's financial fortitude. From a safety and soundness perspective, the higher the capital, the better.

The First State Bank of Healy racked up 30 out of a possible 30 points on our test to measure capital adequacy, beating the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. The First State Bank of Healy's Tier 1 capital ratio was 23.77 percent, higher than the 6 percent level regulators consider adequate, but below the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to economic challenges.

Overall, The First State Bank of Healy held equity amounting to 19.01 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to determine the effect of problem assets, such as past-due mortgages, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

A bank with lots of these types of assets may eventually be forced to use capital to cover losses, shrinking its cushion of equity. Many of those assets are also likely to be in non-accrual status and no longer earning money, pushing down earnings and increasing the chances of a future failure.

The First State Bank of Healy came in below the national average of 37.49 on Bankrate's test of asset quality, racking up 32 out of a possible 40 points .

The percentage of problem assets a bank holds compared to its total assets is a handy indicator of asset quality.As of December 31, 2017, 2.67 percent of The First State Bank of Healy'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 keep a reserve to deal with 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 useful indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on The First State Bank of Healy's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money affects its safety and soundness. A bank can retain its earnings, boosting its capital cushion, or use them to deal with problematic loans, potentially making the bank better prepared to withstand financial trouble. Obviously, banks that are losing money have less ability to do those things.

On Bankrate's test of earnings, The First State Bank of Healy scored 14 out of a possible 30, falling short of the national average of 15.12.

One widely used measure of a bank's earnings is return on equity, or net income (profit, essentially) divided by total equity. The most recent annualized quarterly return on equity for The First State Bank of Healy was 6.62 percent, below the national average of 8.10 percent.

The bank earned net income of $1.0 million on total equity of $15.6 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 1.26 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.