Safe and Sound

The First State Bank

Rice, TX
2
Star Rating
Founded in 1928, The First State Bank is an FDIC-insured bank headquartered in Rice, TX. The bank has equity of $18.4 million on $143.8 million in assets, according to December 31, 2017, regulatory filings.

U.S. bank customers have $125.3 million on deposit at 4 offices in TX run by 40 full-time employees. With that footprint, the bank holds loans and leases worth $86.1 million, including real estate loans of $53.0 million.

Overall, Bankrate believes that, as of December 31, 2017, The First State Bank exhibited a below-average condition, earning 2 out of 5 stars for safety and soundness. Here's a breakdown of how the bank did on the three important criteria Bankrate used to score U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a bulwark against losses and provides protection for account holders when a bank is struggling financially. It follows then that when it comes to measuring an a bank's financial fortitude, capital is essential. From a safety and soundness perspective, the more capital, the better.

The First State Bank achieved a score of 14 out of a possible 30 points on our test to measure capital adequacy, above the national average of 13.13.

One widely used measure of this buffer is a bank's Tier 1 capital ratio. The First State Bank's Tier 1 capital ratio was 16.80 percent, exceeding the 6 percent level considered adequate by regulators, but below the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather economic difficulties.

Overall, The First State Bank held equity amounting to 12.76 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to estimate the effect of troubled assets, such as past-due loans, on the bank's loan loss reserves and overall capitalization.

A bank with extensive holdings of these kinds of assets could eventually have to use capital to cover losses, reducing its equity cushion. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, resulting in diminished earnings and potentially more risk of a failure in the future.

The First State Bank fell short of the national average of 37.49 on Bankrate's asset quality test, racking up 20 out of a possible 40 points .

The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of December 31, 2017, 3.76 percent of The First State Bank'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 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 problematic loans can be a useful indicator when evaluating a bank's ability to manage problem assets. 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 has an effect on its safety and soundness. Earnings can be retained by the bank, increasing its capital cushion, or be used to deal with problematic loans, likely making the bank more resilient in tough times. Banks that are losing money, however, have less ability to do those things.

The First State Bank scored 6 out of a possible 30 on Bankrate's earnings test, coming in below the national average of 15.12.

Return on equity, calculated by dividing net income (essentially, profit) by the total amount of equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for The First State Bank was 2.85 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $515,000 on total equity of $18.4 million. The bank had an annualized return on average assets, or ROA, of 0.37 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.