Safe and Sound

The First State Bank

Ryan, OK
4
Star Rating
Ryan, OK-based The First State Bank is an FDIC-insured bank started in 1894. The bank holds equity of $3.4 million on $26.9 million in assets, according to December 31, 2017, regulatory filings.

U.S. bank customers have $23.4 million on deposit at 2 offices in OK run by 10 full-time employees. With that footprint, the bank holds loans and leases worth $20.0 million, $14.0 million of which are for real estate.

Overall, Bankrate believes that, as of December 31, 2017, The First State Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for an analysis of how the bank fared on the three important criteria Bankrate used to grade American banks.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a bulwark against losses and as protection for account holders during periods of economic instability for the bank. Therefore, a bank's level of capital is a useful measurement of an institution's financial resilience. When looking at safety and soundness, more capital is better.

The First State Bank achieved a score of 16 out of a possible 30 points on our test to measure the adequacy of a bank's capital, above the national average of 13.13.

A bank's Tier 1 capital ratio is a commonly used measure of this buffer. The First State Bank's Tier 1 capital ratio was 15.81 percent, exceeding the 6 percent level considered adequate by regulators, but under the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather economic difficulties.

Overall, The First State Bank held equity amounting to 12.82 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

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

Having large numbers of these kinds of assets may eventually require a bank to use capital to absorb losses, reducing 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 interest for the bank, resulting in reduced earnings and potentially more risk of a future failure.

On Bankrate's asset quality test, The First State Bank scored 36 out of a possible 40 points, lower than the national average of 37.49 points.

A helpful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 1.05 percent of The First State Bank'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 known as an "allowance for loan and lease losses" to deal with troubled assets . That reserve's size can be a handy indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on The First State Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its safety and soundness. Earnings may be retained by the bank, expanding its capital buffer, or be used to address problematic loans, potentially making the bank more resilient in times of trouble. Obviously, banks that are losing money are less able to do those things.

The First State Bank scored 4 out of a possible 30 on Bankrate's test of earnings, less than the national average of 15.12.

Return on equity, calculated by dividing net income (profit, essentially) by total equity, is one important way to measure a bank's earnings. The First State Bank's most recent annualized quarterly return on equity was 1.61 percent, below the national average of 8.10 percent.

The bank reported net income of $55,000 on total equity of $3.4 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.20 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.