Safe and Sound

The First State Bank of Ransom

Ransom, KS
5
Star Rating
The First State Bank of Ransom is an FDIC-insured bank started in 1900 and currently headquartered in Ransom, KS. The bank holds equity of $9.3 million on $44.2 million in assets, according to December 31, 2017, regulatory filings.

U.S. bank customers have $34.7 million on deposit at 2 offices in KS run by 8 full-time employees. With that footprint, the bank currently holds loans and leases worth $17.3 million, including $5.7 million worth of real estate loans.

Overall, Bankrate believes that, as of December 31, 2017, The First State Bank of Ransom exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's an analysis of how the bank did on the three important criteria Bankrate used to evaluate U.S. banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a cushion against losses and as protection for depositors during periods of financial trouble for the bank. Therefore, a bank's level of capital is a valuable measurement of a bank's financial fortitude. When looking at safety and soundness, more capital is better.

On our test to measure the adequacy of a bank's capital, The First State Bank of Ransom racked up 30 out of a possible 30 points, exceeding 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 Ransom's Tier 1 capital ratio was 38.81 percent, exceeding the 6 percent level considered adequate by regulators, and higher than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to economic headwinds.

Overall, The First State Bank of Ransom held equity amounting to 21.02 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to determine the effect of problem assets, such as unpaid loans, on the bank's capitalization and allocated loan loss reserves.

Having extensive holdings of these kinds of assets suggests a bank may eventually have to use capital to cover losses, reducing its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, decreasing earnings and elevating the risk of a failure in the future.

On Bankrate's test of asset quality, The First State Bank of Ransom scored 36 out of a possible 40 points, lower than 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, 2.36 percent of The First State Bank of Ransom'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 keep a reserve to handle problem assets known as an "allowance for loan and lease losses." Comparing how large that reserve is to the total amount of problem loans can be a helpful indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on The First State Bank of Ransom's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its long-term survivability. Earnings can be retained by the bank, expanding its capital buffer, or be used to deal with problematic loans, likely making the bank more resilient in tough times. Banks that are losing money, however, are less able to do those things.

The First State Bank of Ransom scored 6 out of a possible 30 on Bankrate's test of earnings, lower than the national average of 15.12.

One important way to measure a bank's earnings is return on equity, or net income (profit, essentially) divided by the total amount of equity. The most recent annualized quarterly return on equity for The First State Bank of Ransom was 2.84 percent, below the national average of 8.10 percent.

The bank reported net income of $271,000 on total equity of $9.3 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 0.60 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.